Inventiva S.A. (IVA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Inventiva H1 2023 Financial Results Conference Call. [Operator Instructions]. 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, Co-Founder and CEO of Inventiva. Please go ahead.

Thank you, Sandra. Thank you for the introduction. Good morning, good afternoon, everybody, and thank you for joining us on our 2023 half year financial results webcast. So you're familiar with that, but before we begin to please read the disclaimer on Slide 2, and I want to remind everybody that various statements that we may make during today's conference call, during Q&A session will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. So with this message, let me just present you what we will be doing today. So as usual today with me are Pierre Broqua, our CFO and Co-Founder; Jean Volatier, our Chief Financial Officer; and Michael Cooreman, our CMO, and we have a bit of a different format this year. We will provide some corporate highlights, then Jean will go through the financial highlights. We'll have the Q&A, and then I will have some closing remarks. So let me turn to the highlights. It's been a very busy first half, and I would say, very exciting for Inventiva. And I'll start by going over some of the key highlights regarding our key program lanifibranor including an update on the global Phase III NATiV3, our Phase II combo study with lanifibranor and empagliflozin. And of course, we'll come back on the investigator initiative study in patients with type 2 diabetes and NAFLD. If we look at NATiV3, we continue enrollment, of course, in the Phase III, which evaluates lanifibranor in adult patients with noncuratic NASH and F2/F3 stage of liver fibrosis. In January 23, after FDA meetings, we have announced some key changes to the design for our Phase III, which make the study more attractive for the site, but especially more patient friendly due to some key changes. For example, we have reduced the number of biopsy from 3 to 2. From a patient standpoint, we does not have to sign a content for duration over 7 years, but only to 120 weeks. We have added an active expansion study, providing an option for all patients especially those on placebo to access a treatment arm when they completed their 72 weeks treatment. And in addition, we have added an exploratory cohort, which randomized patients who are screen failed on histology from the main cohort. On this trial, I'm very happy to share that Professor Steve Harrison have accepted to be the principal investigator of the exploratory core, given the large number of biomarker that will be measured and non-embedded steps that will refer for will deliver valuable information on a large patient population, which includes patients with a fibrosis stage which will range from F1 to F4. So extremely happy who will benefit from the support of Steve for this trial. This new design has been implemented since the beginning of the year, and now we have over 80% of our site that are adopted this new protocol, and we start to see major improvement. For example, the enrollment rate has doubled inside under PF4 that have adopted this protocol for more than 3 months. And then also, we're very happy to see that screen failure continues to decline month-on-month, and this is a trend that has started in September [indiscernible]. We have not changed our target to enroll the last patient in NATiV3 for the end of this year. In parallel, it's also important to highlight that 2 data sets monitoring board have taken place with a recommendation to continue the trial without modification to the study protocol. Concerning baseline characteristics, we have analyzed the characteristic of the patients randomized in the Phase III compared to the Phase IIb. It's not a surprise that even we apply very similar criteria, the characteristic between the 2 population as similar, except for a higher percentage of patients that have type 2 diabetes enrolled in the Phase III. This is not worrying to the contrary, given that in the Phase IIb, the responder rate on the primary endpoint of the Phase III, which measures patient with both NASH resolution and fibrosis reduction, well in the Phase IIb in the general population versus patients with diabetes, we saw similar responder rate, but the placebo effect was lower in the patient with type 2 diabetes versus the general population, 3% versus 7%. Under the new design, we will have an outcome study, which we will evaluate in a separate Phase III clinical trial patients with NASH and compensated cirrhosis. The approach that we discussed last year with the FDA following the public communication that the agency made in [indiscernible]. This strategy allows to conduct a confirmatory trial that is easier to implement versus the 1 contemplated in the original design will allow us potentially to expand the addressable population beyond patients with F2 and F3 fibrosis to patients with NASH and compensated through cirrhosis. So that's for the NATiV3. Let's now turn to licensing. You know that we have been -- we have embarked in the licensing strategy, and we are very pleased on the progress made by our partner in China, Sino Biopharm, CTTQ. In May, Sino Biopharm to whom we have licensed lanifibranor for the development and commercialization in Mainland China has received IND approval from the Chinese NMPA that allow us to initiate lanifibranor clinical development program in China. I know Biopharma has elected to join our global pivotal trial, and we are pleased to report that the first slide has been activated this week and that the first patient has already been screened. We are in the process of activating a total of 61 sites in China, we will screen and randomized into our Phase III NATiV3 clinical trial. With the activation of the first site in China, we can now expect soon a milestone payment upon enrollment of the first Chinese patient in NATiV3. So that's the update for NATiV3. Let's now turn the other study that we're conducting. The first, as you know, we reported during the first half, positive top line results with the investigator-initiated study conducted by Professor Ken Cusi evaluating lanifibranor in patients with NAFLD and type 2 diabetes. The study achieved the primary efficacy endpoint, demonstrating a 44% reduction in hepatic fat measured by photo magnetic resonance following 24 weeks of treatment in patients with NAFLD. Beyond that, the study demonstrated that a significantly higher proportion of patients achieved a greater than 30% liver producer with the action as well as NASH resolution with lanifibranor compared to placebo. And then [indiscernible] further study demonstrated a significant effect on a series of secondary points lanifibranor treatment significantly grow both hepatic and peripheral insulin sensitivity, which translated into better glycemic control. And also, we improved the adipose tissue dysfunction with a robust increase in plasma adiponectin. We will really have now New drug data from 2 separate trial, showing the efficacy and the benefit this compound could provide to patients with NASH. Of course, in the study with Prof. Cusi, the treatment with lanifibranor 800mg once daily for 3 months was well tolerated with no safety concern reporting. We have submitted this good result, this promising results to the upcoming AASLD congress, and we plan to have them published in the peer-reviewed journal. Confirming our Phase IIb combo study with lanifibranor and SGLT2 inhibitor empagliflozin, we expect to have the first result of this study called LEGEND for the end of Q1 '24. Before I turn to Jean, let me give you 2 key financial milestones that were met recently in August, we conducted a capital increase of approximately EUR 35.7 million, consisting of 2 transaction, a capital increase of approximately EUR 30 million, and then there was the issuance of Royalty Certificate for an additional EUR 5 million. Of course, the vast majority of this capital increase will be primarily focused to finance fees. And then very recently, we announced a deal concerning Japan and Korea with a licensing agreement with Hepalys Pharma to develop and commercialize lanifibranor in Japan and South Korea. Hepalys Pharma is a new company created by Catalyst Pacific and Inventiva, has exercised its right to acquire 30% of this company. While we chose the Catalyst Pacific is because there are an investment firm with the large experience in creating a financing venture capital back, biopharmaceutical companies to develop a product, especially in Asia. They have an experienced management team, which is easy to discuss with. We were exactly the same level -- on top of that, they are backed by, I would say, top class investor on top of Catalyst Pacific, you have Mitsubishi, DBJ Capital and MEDIPAL. We are eligible to receive $10 million upfront payment. And on top of that, we have an additional EUR 231 million clinical regulatory and commercial milestones, in addition to tier royalties that start from mid-double digits to low 20s, based, of course, on the net sales of landing in these territories. We're also interested in this [ PKPD ] because Japanese will conduct the two Phase I in Japanese healthy volunteers and patients to prepare and fund the Phase III to get approval in NASH in this territory. I would also like to point out that on top of the 30% of shares that we own in Hepalys Pharma we have the option to acquire all outstanding shares at a pre-agreed multiple of post-money valuation. And on top of that, if Hepalys received an offer to sell the license or rights related to lanifibranor we have a right of first refuel. If we take a step back, I think we have announced a couple of years ago that we wanted to license lanifibranor in China and Japan because you need local development with these territories. We have achieved that. And as I'll path to generate already [ EUR 22 million ] of nondilutive funding. When we look at the global level of milestone and the milestone payments were eligible to we are eligible to more than $500 million. Now let me turn to Jean, who provide you with an overview of our H1 '23 financial reports.

Thank you, Frederic. Good morning, good afternoon, everyone. So you just heard that the activities have been intense in this first 6 months and even the last quarter. And of course, the financials are just reflecting the intense activities. First of all, the capital raise that Frederic talked about gave us the opportunity to have new shareholder on the board on top of existing shareholders who also participated. So in particular, the new category funds, category LLC, who took a stake of close to 10%. This operation also gave us the opportunity to identify other fund that could be interested to be on board after the full enrollment of the Phase III patients. In terms of analyst coverage, we have amplified the existing analyst in particular with the Stifel and ROTH who had initiated and we're working on more. These 2 new analysts have recommended target price ranging from $11 to $27. These days, average consensus is around EUR 14 to EUR 15. We fully recognize that with more than EUR 200 million capital market cap, we believe it's definitely disconnected from what we think the potential of lanifibranor asset has and compared to the competition. So let's go through the key figures of the profit and loss accounts. So revenues close to EUR 2 million this semester due to the milestones received from CTTQ after the obtention of the IND in May. Other income increasing at EUR 4.7 million. This reflects the increase in R&D expense, but also the first amount we start [ reinvoicing ] to our Chinese partner. Of course, the major financial information is the plus 81% increase in R&D expenses at EUR 54 million R&D expenses represent to give an idea, 88% of our overall operational expense, 8-8, 88% of which more than 80% is concentrated under the lanifibranor assets and action plan and development plan. G&A is stable at EUR 6.8 million, which shows that these non-direct operational expenses are under control. The net financial income is close to 0. We have not benefited from the foreign exchange between euro and dollars as last year because the dollar has weakened during the semester. And bottom line, we have a net loss, we reached a net loss of EUR 55.3 million compared to EUR 29.5 million, and this is as expected in our projections. Let's talk quickly about cash position, what we call our extensive cash position, meaning cash and cash equivalents and also all the term deposit terms that are liquids at EUR 40.6 million overall, EUR 40.6 million at the end of June '23 compared to EUR 88.4 million at the end of December last year. So we have used EUR 48 million, an average EUR 8 million burn rate per month. And of this EUR 48 million, the essential comes from the net cash used in operating activities obviously, EUR 45 million negative. As I mentioned, you have seen that the operational activities on the different studies have been very strong and it's derived from this activity. To conclude the key financial highlights. When you consider all the financial and operational events, the milestone from CTTQ, the first milestone from CTTQ, the raising of the end of August the upcoming upfront from Hepalys for the Japanese collaboration. And the next short term milestones related to the first patient enrolled in Great China, this should allow us to trigger at the end of the year as planned in the contract the second tranche of EUR 25 million from the European Investment Bank. And we believe that at that point that this will allow us to operate until the beginning of the third quarter of 2024. I think that is for the financial highlights. I will be more than happy to answer more questions at the end of the presentation, and I turn over to Frederic for conclusion and before the Q&A session.

[ Sandra ] actually turn immediately to Q&A. So maybe Sandra, if you can give the instruction on how to ask questions, and then we'll go to the conclusion.

[Operator Instructions]. And the first question is from the line of Ed Arce from H. C. Wainwright.

Great. Thanks and congrats on the progress. Just wanted to ask about some of the upcoming conferences -- can you hear me okay?

All okay.

Okay. Great. I know you mentioned for AASLD, there will be some additional data from the Phase II in NAFLD and type 2 diabetes conducted by Ken Cusi. Just wondering if you could elaborate specifically what kind of data we can expect there. And then just wondering as well the renal impairment study that you have listed in your press release, was required for regulatory submission. Is there any other ancillary studies or data that is necessary for regulatory submission. And I'll get back in the queue.

Thank you, Ed. So maybe for our AASLD program may be I turned to Michael and then for the renal impairment I don't know if Michael or Pierre want to cover that question, let them decide.

Yes. Sure. So at AASLD, we have 2 posters that are further analysis of native of the Phase II study. The data from the study in patients with type 2 diabetes and in this abstract, we call it metabolic dysfunction associated steatohepatitis liver disease, so we have adopted the new nomenclature based on the work that we did Ken Cusi is submitted as a late-breaker abstract. And that submission was this week. So we'll now soon when it's accepted, and the content is based on largely the data that were also presented in the press release on the top line data. In other words, the demonstration that lanifibranor has a very potent effect on insulin resistance, not only in the liver, but also in skeletal muscle. So adipose tissue and related to that, the improvement of the metabolic market, specifically with regard to adipose tissue in or [ steatohepatitis ] liver. So they were measured with imaging with MRI spectroscopy based imaging and improvement of lipid and glucose metabolism markers, which corresponds together to the upstream pathogenetic mechanisms of the disease of NASH. And since all these patients had type 2 diabetes, you can implement the new nomenclature for this presentation. The renal impairment study is complete indeed with very good results. As you know, our clinical pharmacology packages, otherwise complete. We have also, we have done a hepatic impairment study, which is also complete from the enrollment perspective.

We will now take the next question. One moment, please, from the line of Lucy Codrington from Jefferies.

Just a couple. Just with regards to recruitment into NATiV3, just reading the report, it looks like at the end of July, you had about 50% recruited. So I guess it's just confirmation that you expect you could recruit 50% of the study or the remaining 50% of the study now by the end of the year to ensure the readout as expected in 2025. And then secondly, on -- just on the R&D spend, I'm just slightly struggling even with the milestones, EIB loan and recent upfronts and raise to get my cash runway to match. And I just wonder, is there anything in the R&D from this half that is -- won't be repeated or whether you can disclose what proportion of that R&D spend relates to the LEGEND study and therefore, won't be incurred next year. Just something to give an idea? Or should I be expecting R&D to increase again next year? And therefore, is there anything else that I should be considering to help when I'm looking at my cash runway. And then finally, just on the plan to acquire 30% of Hepalys, does that come with any financial outlay on your part?

Yes. Thank you, Lucy. So I'll cover the update on recruitment and the last question. On Hepalys, also the recruitment, yes, you're right. Our target is to target the end of recruitment for the end of the year. We believe that the recent progress seen with implementation with PF4 should bring us there. Of course, we need that old side that have implemented PF4 show an increase like the one that have already implemented it. We also rely on new sites that we are opening, we have approximately 400 sites, and we're still outing on opening new sites. So this new site need to also provide what they have suggest that they can provide. And I would say that also our partners, Sino Biopharm with 61 sites in China, we also hope that they will manage to recruit as they have committed to. On your question about the policy, yes, we bought 30% of the company. Yes, we had to pay for that, but it was a symbolic some that has no impact on cash runway or absolutely not material, very low. And concerning cash runway, I will let Jean explain and confirm that with the EIB and the EUR 10 million of Hepalys, we have a cash runway until early Q3 of next year.

Yes, sure. Yes. So we confirm that with all this cash -- in the cash flow is okay until July, August. This is based on the fact that, of course, this year, we have a very important increase in R&D, but it's to reach -- it's definitely to reach kind of plateau. We believe at the best of our knowledge that we would be stable overall in terms of OpEx and R&D expenses for '24 and '25. And the cash runway guidance is based on this assumption. I think you have also asked for what next after July of course, and I think it's a consensus -- it's also why there is a kind of a negative unfavorable pressure, I would say, on our target price. There is an overhang on which we are working as you have -- we are working progressively on that. The strategic goal this year was to trigger this second tranche of the EIB. So we are working on the future financing, which could be using the ATM, you have noticed that we have totally reactivated the ATM program. So that is operational any time, we also finance rate somewhere in the first semester, because of the -- to bridge with the expenses we need to have until the H2 '25, which is the target and objective for the HLR for lanifibranor and we count also on some potential additional business development activity. You know that on the odiparcil, which is our other well-advanced assets, there may be some opportunities to license the product because, again, we prioritize on lanifibranor, but we do not want to leave this interesting assets in the mucopolysaccharidoses and of course, we will -- since we have met all our milestone with the EIB financing, we may also rediscuss additional possibilities to work with the EIB. We're going to have a short business update. And these are all the possibilities to continue -- we're reinforcing our cash position short and medium term.

We will now take the next question. It's from the line of Evan Wang from Guggenheim Securities.

[ Congrats ] to the progress. I know you guys touched on some of the baseline characteristics relative to the Phase IIb, any more details you can share in terms [indiscernible] the different regions you're enrolling? And then as a follow-up, I guess, can we -- I guess, are there plans to kind of share [ patient characteristics ] based upon completion of all, and as a third question, with an partnerships, can you help us think about the potential dollar amount of near-term milestones, say, in the next 12 months?

Okay. So you were a bit cut. So I understood that your first question concerned the region we are recruiting forum for NATiV3. The last question was about near-term milestone for our partnership. I could not understand the second question. If you could repeat .

Got you. First question was more on background medicines in the trial and geographical differences and baseline characteristics. Second is, I guess, are there plans to share kind of complete based on characteristics upon completion of enrollment? And yes, the third question was potential upcoming milestones.

Okay. Yes. So I'll address the second and third and may be Michael can discuss the patient characteristic of the Phase III, they are until now. On disclosing the baseline characteristic upon completion enrollment, we have not discussed that internally, but it seems a good suggestion. I wouldn't see why we shouldn't do it. And in terms of partnerships, milestone we expect a short-term milestone coming from our partner in China, CTTQ upon enrollment of the first patient in the global trial. Michael, do you want to discuss the patient characteristic of NATiV3?

Yes, sure. NATiV3 is a Phase III study. So it is designed to enroll a similar patient population as in the Phase II study, which is indeed the case, the geographic reach of NATiV3 is larger than native, which was mainly conducted in Europe, which is a plus advantage because we have data from more representative patient populations globally, which is also relevant for the United States and for the FDA. The regions where we have -- the majority of the sites are in the United States and the majority of patients enrolled are in the U.S. as well. In addition, we have sites in several European countries in the European Union and U.K. in Mexico and South America, Argentina, Chile specifically. And in Australia and now also in China and also a few sites in South Africa. So we do have a geographic reach that I think also addresses the requirement to have a diversity in the patient population, which is good. Other than that, the patient population is very similar. We see some minor differences, which I think is what you expect. For example, we have percentage-wise a bit more patients with over 2 diabetes and NATiV3 -- which is good, I think, because these 2 conditions type 2 diabetes and NASH have essentially the same underlying disease biology and even patients who have NASH who do not have over type 2 diabetes do have insulin resistance. So I think overall, the Phase III study, the NATiV3 study is really an targeting the same patient population with regard to their disease profile.

We will now take the next question, one moment, please, from the line of Jacob Mekhael from KBC Securities.

I have a few, if I may. My first question is what outcomes would you like to see from the readout of the Phase II LEGEND trial? And could we see maybe studies with other combinations in the future? And my second question is perhaps looking further ahead, to the outcomes of NATiV3 trial, do you expect to replicate the delta as seen in the Phase II? Or should we take into account some attrition moving from Phase II to Phase III?

Interesting question. Michael, do you want to try to give it the first half to the 3 good questions.

Sure. I think with regard to what we expect from LEGEND. LEGEND is a study that includes a combination with empagliflozin, SGLT2 inhibitor, which is approved and first-line treatment for type 2 diabetes. The lanifibranor itself as a pan-PPAR agonist covers the entire spectrum of disease biology. And it's an important aspect and strength of the compound. So in clinical practice, treatment of patients is looked at individually for each patient. And so the maybe patients who will benefit from an additional compound that involves metabolism or the disease such as or very similar to the way that type 2 diabetes is treated today, I think would ultimately find its way in the treatment of NASH. So we will get information on the beneficial effect of adding an SGLT2 inhibitor to lanifibranor with regard to the different relevant in these markets. And that's one aspect. The second aspect is you do see an effect on the weight with lanifibranor, which is, as we have shown and has also been shown in many publications for pioglitazone, which is quite essentially different from weight gain resulting from poor nutrition or lack of physical activity. It has to do with maturation of insulin sensitive mostly subcutaneous adipose tissue. That's been shown very clearly for pioglitazone [indiscernible] effect. And our data from NATiV3 or in alignment with those data that have been shared by pioglitazone. So the weight gain is not a safety concern on a medical concern, but it is something that some patients prefer not to see. And so -- and it is also modest. It's on the average 2.5, 2.4, 2.7 kilograms for the low and the high dose, respectively. It's not seen in all patients. If you take 5% through baseline has got off, it's 1/3 of the patient population. But the combination with an SGLT2 inhibitor will actually enable us to show, listen, you can actually take care of that if you combine the compound lanifibranor with an SGLT2 inhibitor. And the fact that this effect on weight gain can be balanced out has also been shown for a combination of pioglitazone and SGLT2 inhibitors. So that's an additional message that we will have from -- we expect to have from LEGEND when we have the interim analysis data. Do we plan other combinations? Obviously, today, in addition to SGLT2 inhibitors in this field, the GLP-1 receptor agonists have seen a quite explosive growth in their use for weight reduction also for the treatment of type 2 diabetes, specifically semaglutide. So while today, we don't have a planned study to actively study the combination we do have -- we will have data from the combination of lanifibranor with GLP-1 receptor agonists. One we allow patients who are on a stable dose with the GLP-1 receptor agonists to enter NATiV3, so the percentage of patients who have the combination of lanifibranor and semaglutide mostly, but also other GLP-1 receptor agonists. And then in addition to that, we have implemented an amendment that actually accommodate the fact that patients can start -- it's not recommended, but if they start semaglutide during the 72 weeks of placebo-controlled treatment, they will be able to take the study, they are not required to be taken out of the study for the analysis or as nonresponders. So patients can actually -- if they start semaglutide during the 72 weeks remain in the study, and we'll have this accept analysis for that patient population. And third, most of the patients have completed the 72 weeks of placebo-controlled part of the study, they will enter the extension phase where they receive at least, they will be randomized to 1 of the 2 doses of lanifibranor and during that period, patients can also add GLP-1 receptor agonist to that treatment. So there will be a number of sources from which we will have information on the combination of lanifibranor with the GLP bond was there another question that currently .

Yes. The last question, which is I would say, looking to crystal ball was do we expect a higher delta -- higher responder rates with a longer treatment period?

Well, that would be speculative, of course, yes, but that's speculation. Hopefully, yes. But we cannot say that. And I think it should be based on the data that we have them.

And anyway, our statistical analysis plan and obviously, that has led to power the study at 90% and the target recruitment of approximately 150 patients is based on the responder rates and placebo rates that we have seen in the Phase IIb even, given the mechanism of action, we could expect a higher response rate of the patients are treated for a longer period of time. But as Michael said, that would be speculative. So very prudent approach .

There are no further questions at this time. I would like to hand back over to the speakers for final remarks.

Yes. Thank you. So very briefly, [indiscernible] this moment are quite important because we can look back at what we have achieved, and I think we can be proud of what they achieved or the milestones that have been met over the last months, both for lanifibranor of course, for our finances. We aim to continue this positive train by targeting the end of recruitment the end of the year, probably the first result of the combo trial with NPA at the end of first quarter. And of course, we plan to draw the second tranche of the EUR 25 million. But more importantly, what Jean has spoken in the future is our lanifibranor asset, lanifibranor is very well placed to make it to the finish line in NASH. We have a very competitive profile. It's a oral drug, oral compound, and it is efficacious, both on NASH resolution and at a direct antifibrotic activity. And on top of that, it's active on many metabolic markers. And also, we've shown recently to have a strong insulin sensitivity effect. So on top of that, given the competitive landscape and where we stand with our Phase III compared to competition, we are convinced that lanifibranor will play a key role in treating patients with NASH. So thank you very much for attending this call. And I would say that the IVA team and entire team look forward to seeing you all in hopefully in Boston for AASLD. We'll have our booth and all our team will be there and hopefully meet with all of you. Thank you very much, and have a great day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.