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

Good day, and thank you for standing by. Welcome to the Inventiva Annual Results 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Frederic Cren. Please go ahead.

Thank you. Good morning, Good afternoon, everybody. And thanks for joining us today for this webcast. Before we begin, as usual, I ask you to please read the disclaimer on Slide 2 which will appear now and I want to remind everyone that the various statement 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 CSO 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 that some important changes to the design of the Phase III, 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 discussion we had with the FDA and on the alternative approach put forward by the U.S. FDA, which includes 2 independent Phase III, one based on histological outcomes, NATiV3, which would allow us if our results are positive to fight for accelerated approval. In the second Phase III study in patient with MASH/NASH and compensated cirrhosis, which will be our confirmation trial in order to demonstrate clinical outcomes and which would secure, if positive, full approval. As part of the development of lani, we were pleased that our partners Sino Biopharm receive their IND approval by the Chinese NMPA to initiate the clinical development in China. Sino Biopharm is participating to our global NATiV3 Phase III clinical trial. And we have close to 723 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 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 intrahepatic triglyceride in patient with MAFLD and NAFLD in type 2 diabetes treated with a low dose of lani for 6 months. What was key in this study to win the effect on hepatic fat and liver and muscle 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 in 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 Hepalys Pharma. This is an exciting milestone and expands our potential footprint. With this agreement, we've received a EUR 10 million upfront payment and have exercised our rights to take a stake ownership in the newly created company. In February, we reported the first SUSAR ever experienced with lani and this we were approaching the end of our screening for NATiV3. Our team has been an ease all hands on deck. We have made the changes to our protocol as recommended by our data monitoring committee and work to date back on track. We have resumed screening and also we have started randomizing new patients in the majority of our site and are centrally IRB in the U.S. and we confirm that we target MASH patient first visit in first half of '24. Finally, just last week, we announced the positive interim analysis of our proof-of-concept Phase II clinical trial LEGEND, evaluating the combination of lani with SGLT2 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 and demonstrated that the combination addresses a moderate and metabolically healthy weight gain seen in some patients. [Technical Difficulty] the study showed that both lani alone and in combination with empa induce a redistribution of fat from visceral to subcutaneous fat, reflecting a shift from proinflammatory visceral fat towards metabolically healthy adipose tissue. This redistribution of fat is consistent with improved insulin sensitivity, seen with both lani alone or the combination. Finally, lani improved markers of cardiometabolic health, the effect size appears to be further improved when lani is combined with empa. These results further bolster our robust data [Technical Difficulty] NATiV3 and from the investor initiative study conducted by Professor Cusi. [Technical Difficulty] of MAFLD. We plan to present this data in scientific congresses as well submit it for publication. We briefly cover several key financial milestones before turning it over to Jean. In 2023, we have secured the financing of approximately a $39 million with equity issuance. We also secure $50 million of non-dilutive from a partner in China following the progress made in the development of lani and then an additional $10 million with a signatory of the licensing agreement with Hepalys Pharma, which also make us eligible up to $231 million of clinical, regulatory and commercial milestone as well as royalties. And also as you are aware, in the beginning of the year, thanks to the achievement of key financial and operational milestone, we drew the second tranche of the EUR 50 million EIB loan, in the second tranche of EUR 25 million. We are very optimistic for the future of lanifibranor in Inventiva and are focusing on the upcoming important milestone, which is for us, the last patient first visit of Phase III 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 that target. We have more than 75% of the patient targeted to be randomized in the main cohort and more than 350 are in screening. Importantly, close to 90% of this patients -- of the patients randomized come from North America and EU, which we think bodes well for the quality of the result. From a financial standpoint and [Technical Difficulty] that we are of course focusing our efforts to expand our cash runway. And we're confident that the recent positive data from LEGEND, the progress made in NATiV3 and the approval of Resmetirom with no requirement of biopsy for prescribing the drug, create a favorable environment for Inventiva. The management of patient with NASH/MASH will require treatment option and potential combination therapy. We certainly think that given lanifibranor dataset and mechanism of action, there is a significant space for an oral drug with a direct anti-fibrotic activity and strong insulin sensitizer like lanifibranor. This was clearly highlighted in the recent physician survey we conducted in the U.S. showing prescriber expect to write lanifibranor for approximately 30% of their MASH patients. We now turn it over to Jean, who will provide you with an overview of our full year '23 financial reports.

Thank you, Frederic. Good morning, good afternoon, everyone. So everything has been said, let me say and the financials for '23 reflect quite rich activities as you have heard. Let's start with the profit and loss accounts. So the company's revenues for this year amounted to EUR 17.5 million, I guess, a record ever for Inventiva since it had been created. So an increased by more than 40% compared to the EUR 12.2 million recorded in '22. As said, the revenues derived from 2 things: first, the continuing 2 milestones from CTTQ, Sino BioPharm, the Chinese partner, $5 million. And also for the 2/3 of this revenues in '23 from the milestone -- the upfront, sorry, the upfront payment of $10 million from Hepalys. And also a noncash consideration for the fair value of an option to acquire shares of the JV. The key thing is, of course, the increasing efforts in R&D, so an increase of 82%, reaching EUR 110 million in '23 compared to EUR 60.5 million in '22. Obviously, these reflects the acceleration -- planned acceleration in the '23 activities with regard to the clinical development for NATiV3 and also in a lesser extent with the LEGEND Phase IIa combination trial we have just talked about. G&A expenses amounted to EUR 13.8 million, a slight increase of 7% compared to the EUR 12.9 million in '22. We consider it's well under control, considering the growing scope of activities of the company. To be outlined also a net financial income of EUR 5.1 million loss, which reflect -- we've talked about the EIB first tranche in '23 with interest rates which will be paid, I remind that end of '26, early '27. And of course, we incur the expense related to this loan and also completed back some interest that we pay for the other existing minor loans. The variation in net financial income is also due to close to 0 foreign exchange results in '23 compared to greater positive results in '22. This is obviously related to the euro-dollar context in '23 compared to last year. We record for the first year the share -- our share of net loss for the stake we have in Hepalys in the Japanese JV with a noncash loss of EUR 12 million, of course, compared to 0 in '22. And all things considered, the company's net loss for the full year reach EUR 110.4 million, compared to EUR 54.3 million in '22. Let's talk now about cash. If we consider what we call a global cash position, including the pure cash and cash equivalents, the middle term investment, we are -- that are very liquid and easily mobilizable. And the second tranche of the European Investment Bank that we drew mid-January, we started the year with close to EUR 61 million in cash compared to EUR 88.4 million at the beginning of the prior year. So it's a decrease of close to EUR 30 million. Obviously, it reflects the higher cash consumed by the operations EUR 82 million, including by the way the EUR 20 million cash in, definitely deriving from the effort in the R&D. By the way, in terms of metrics for the high R&D, we must underline that lanifibranor is really focused in our financial efforts. R&D in the company will present 87% of overall expense. Of this R&D -- of this 87%, lanifibranor represent 85% of this R&D expense. And overall for the company, 75% of our financial efforts are dedicated to this program. So the negative impact, of course, of the operating cash flow has been partially offset by the operation that Frederic reminded. First end of August the finance rate of EUR 35.7 million growth in regular capital increase. For such an increase, we got the support from existing partner such as Sofinnova and Yiheng Capital. And also, we're very pleased to welcome Qatar Holding LLC, who now holds close to 10% of our shareholder base. The negative operating expense has been also set as mentioned by the $10 million upfront payment from Hepalys and the $5 million related to the 2 milestones reached with CTTQ, first patient randomized and the obtention of the IND. Overall, our cash position as of today, we do confirm that this will allow Inventiva to operate until early Q3 '24. We'd be glad to answer any question in the Q&A session if needed. I just pass over to Frederic for the conclusion. Thank you.

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

[Operator Instructions] We will now take the first question coming of the line of Seamus Fernandez from Guggenheim Securities.

So 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've got the Resmetirom data, not a lot of changes that we see in HbA1c in a diabetic patient population, whereas we very clearly see substantial changes in HbA1c with lani. And then also the incremental benefits of adding an SGLT2 would suggest that this opportunity is quite substantial. Just wanted to confirm your view of the market, his comments that he would much prefer to give this product to -- or give this product to diabetic patients? And then also just the confirmation that depending on the timing of the completion of last patient, when -- if you would strongly expect this to be the next oral MASH therapy available in the market? And I have one additional follow-up question.

Thank you. Thank you, Seamus. Yes, we were actually very pleased by the comment made by Steve Harrison, who said that for him, once lani will be approved, if you see the patient entering his clinic with MASH and type 2 diabetes, he would prescribe lani over any other compound he has seen. That for us was a very nice comment because we know that there is a large proportion of patient with NASH and type 2 diabetes between 40 to 50. We have 60% in our Phase III study without looking to recruit more patients with type 2 diabetes and this patient with type 2 diabetes actually have a form of NASH that is more severe. You tend to have a higher proportion in patient with us F2, F3. And also they tend to have a more progressive fibrosis. So that was great. And when we look at the competitors, we're really seeing that this activity on HbA1c, the insulin sensitivity properties that we have that were clearly illustrated by the study we did with Professor Cusi where we saw statistical impact on insulin sensitivity in the liver, in the muscle, is really a feature we really want to put forward and really work on stressing the importance of all these properties. And we should note also -- not forget one piece of work that we did and where we saw that a patient with pre-diabetes treated in the Phase IIb, so their diabetes stopped -- their progression towards diabetes stopped when treated with lani, so it's really a compound lani that has a great profile for patients with type 2 diabetes and also with pre-diabetes. And then to your question about do we think we are the next orally approved drug? Yes, we -- I can confirm that because we are close to finish the recruitment in the first half of '26. The other oral drug that we know could be, I think, set but it has to start Phase III and the other drug in development in Phase III are injectables. And all the study that we have done with payers and especially prescriber really put oral drug as a preferred administration mode versus injectables. So I think we're very well positioned in this field.

Great. And just as a follow-up question, as it relates to the Phase III, you commented that, I think we -- you've already, kind of, added in a further 5% of patients recruited officially into the study and then have an additional 15% to 20%, so it sounds like the conviction that the Last Patient First Visit will occur by the end of the first half of this year, or during the second quarter is extremely high, is there sort of a sooner rather than later aspect to that, that you have higher conviction in? And then just secondarily, maybe you can update us on the progress towards sort of F4 patients that I believe are more exploratory as part of the study?

So we're starting to rescreen. We started rescreening in the U.S. with the sites that are under central IRB and the opening of our site is following the plan. There is one [indiscernible] doing as planned, so we are confident that there is [Technical Difficulty] one item we don't control will be the screen failure rate following the introduction of this autoimmune antibodies that we put in place following the recommendation of the Data Monitoring Committee. We believe the impact will be limited, but only the future months will confirm that. But if this screen failure doesn't change significantly compared to what we have experienced in the past, we should be able to meet this end of recruitment as planned for the end of H1. We have had many webinar meetings called with all our sites. They understand the situation. They are not -- they are motivated to restart screening. So we really got positive feedback from how we handle this SUSAR. Then on the next Phase III, which is Phase III that is requested to secure full approval and that we plan to conduct in patients with compensated cirrhosis. We need to have this trial ongoing when we file for NDA. We are including patients with F4 compensated cirrhosis in the exploratory arm. We currently, out of those 200 patients, we will have approximately 30% with F4. We are not doing a second biopsy, but we have a very large set of noninvasive test planned to be used in this patient that are stratified one-to-one-to-one in the exploratory cohort. So that will give us, I think, valuable information on how lani performs in this patient and will help us finalize the discussion with the FDA on the design of this confirmatory trial.

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

Just a couple of quick ones for 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?

Okay. So the second question is easy, we have met all the requirements of the EIB and that allowed us to draw the second tranche of EUR 25 million. And then if we want to put in place the new loan with EIB, we need to discuss that with them. I think they are lot close to it, but they are open to do such a thing, but we have not started discussing on that. And then to -- when we plan to open ex-U.S. sites, so Canada, there are site on the central IRB. So those we plan to open those soon. And then the other countries will start opening them starting from April with a focus for us on Europe. What I mentioned in my introduction is that most of our patients come from the U.S. or North America, close to 70% and an additional 21% come from EU. So they are really a focus from our team to focus our efforts in these 2 geographic areas.

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

Well, our strategy concerning lani is that we see that there are 2 strategic region for NASH that are Europe and the U.S. We want to keep those right, I would say, bundled together as one. And so we would -- we are more looking at partnering Europe and the U.S. together rather than splitting those. We think that an appropriate moment will be for Phase III because we are confident in the data we will generate both Phase III and the ability to get approval on -- based on the NATiV3 data.

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

Sorry, I didn't quite catch it in the prepared remarks. Could you just repeat the state of random -- the kind of randomization post the screening resuming? And also just whether you had a set amount already in screening when the recruitment was halted, has that number changed within that screening pool, given the kind of safety concerns is probably overstating it, but since that incident and then the required additional monitoring that the trial will entail, has that meant you've lost any patients within screening? And then just on the partnership kind of commentary. I guess I was going to ask if you're in any active discussions with potential partners and whether interest had increased since your recent data and the Resmetirom approval? I guess your comment just then suggesting you prefer to wait to last a Phase III might suggest that, no. But I guess, can you afford to wait till after Phase III given the cash constraints that you have? And could you explore other kind of routes in terms of a potential option agreements, are these type of things being considered in order to get you to that data, which seems to be the most important thing? And then, I guess, related to that, you mentioned about potentially another EIB loan. How long do those loans take to negotiate, just we've only got a limited amount of time before the cash runway expires?

Yes. Okay. So I'll take the first 2 questions about the status of the trial and the partnering and I'll let you answer the question about the European Investment Bank and how long that takes on screening, what I said is that we have more than 75% of the patient needed in the -- for the main cohort that are randomized and that we have more than 350 patients in screening. So this -- the pool of patients in screening is diminishing, but it's not due to pushback or a change of attitude of the sites towards lanifibranor. To the contrary, as I said, we have had the meetings, call webinars, a face-to-face meeting with the site and the excitement remains, especially after the LEGEND data. The patients in screening are diminishing is just because at a certain moment, there is a date of, let's call it, the date of validity for the lab test and for the biopsy and for -- at a certain moment, we lose those patients. And then also I mentioned, gave some data about where they are and what is important is that the countries which we will reopen first as really those countries that matter, which is North America and Europe. And when I say that matters is that they are providing the most -- the country providing more patients in the trial. Now concerning our cash runway, yes, we have a contract runway until early Q3. Luckily for us, we are in a, I would say, in a good moment with positive data in the NASH field due to the Madrigal approval, which has lifted the regulatory hurdle. The need -- the patients do not need to go under biopsy. And our data we are in a [Technical Difficulty]. All options are on the table. It could be, as you mentioned, working with a big pharma or it could be to go back to the capital market. We have, I think, a strong shareholder base that has been supportive for the past 12 years. And so we think we are in a positive trend. So maybe I'll let Jean answer your question about the timing of the EIB.

Sure. We have continued discussion with the EIB. By the way, they have asked to come visit us on the site in a couple of weeks. There are 2 ways. One way, the short circuit would be below EUR 10 million. This could be managed within the existing loans and generally, it could be within 2 or 3 months. And the second option is a greater tranche, which would be managed through a new finance agreement. Obviously, both would go with cash injections. Frederic was talking about potential capital increase, so this could be managed together with this operation. And for the second option, I guess that within 6 months to 1 year, this could be possible to discuss a set tranche, but again, everything is depending on cash -- future cash injection on which we are working actively.

[Operator Instructions] We will now take the next question from the line of Jacob Mekhael from KBC Securities.

Could you please provide some guidance on how we should look at R&D for 2024? And do you expect R&D to decrease once you have completed enrollment in the trial? And just perhaps maybe to go back on the target of 950 patients, do you think that target is achievable only with U.S. sites? So will you need the additional sites in order to reach that? And also perhaps a second question on that is, do you need to meet certain thresholds in terms of patient numbers from each region?

So in terms of R&D, I'll let Jean give you the highlights for the coming years and with our hypothesis on our planning. So when we say we plan to reach enrollment by the end of H1, this include the contribution that are outside North America, mostly from Europe. In terms of minimum numbers to achieve the -- I would say, the only requirement and if I'm wrong, I'll ask Pierre to intervene, but I think it came from the FDA wanted a certain percentage to come from the U.S. and we have largely achieved that target.

So maybe for your question about the trend on the R&D expense, we should increase slightly in 2024, something around 10%, plus 10%. But then, as you mentioned, the year after '25 should decrease, of course, due to the end of the recruitment and the investment to finish up the recruitment.

There are no further [Technical Difficulty]

I think we lost the operator, but -- so I just make the conclusion. Just to mention that '23 was a busy year for our team at Inventiva and 2024 will be another busy year with many milestones to achieve. What I think is really great for Inventiva is that we have an incredible asset. We have a lower compound with a very attractive and competitive profile. And clearly the data we have generated makes lani a compound that is very well placed to make it through the finish line in MASH/NASH. And we are convinced that lani will play a key role in the treatment of patients with MASH/NASH. So thank you very much for attending. Thank you for your support and I look to continue the open dialogue throughout 2024. Thank you very much.

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