Ipsen S.A. (IPN) Earnings Call Transcript & Summary

Hello, everyone. I'm delighted to welcome you this afternoon to our H1 2025 results presentation, which can also be found on ipsen.com. I want to use the time we have together to focus on the progress Ipsen delivered in the first half of 2025 and on the future opportunities and platforms for growth. Please turn to Slide 2. Please take note of our forward-looking statements, which outline the routine risks and uncertainties contained within this presentation. Also, all my comments on growth will be based on constant exchange rates. Please turn to Slide 3. I'm going to take you through the presentation of our latest business update, followed by Christelle Huguet, Head of Research and Development, who will provide an R&D update, while our CFO, Aymeric Le Chatelier, will take you through the financials. At the end of the presentation, all 3 of us will be participating in the question-and-answer session. Let's begin by looking at today's highlights. Please turn to Slide 5. Today's headlines illustrate how we are continuing to produce sustainable growth. Total sales grew by 11.4% in the first half of 2025, accompanied by a core operating margin of 36%. As you have seen, we announced last week the European Commission approval of Cabometyx in neuroendocrine tumors, an area where Ipsen has a strong legacy. During this first half, we also made good progress with our pipeline, including the entry in Phase II of IPN10200, our long-acting neurotoxin AD in cervical dystonia. This milestone highlights the fourth study in the global long-acting neurotoxin development plan in therapeutic and aesthetic indications. Pipeline progress also came in form of the EMEA regulatory submission of tovorafenib for pediatric low-grade glioma earlier in the year. In the second half, we anticipate a pivotal trial readout for Fidrisertib in FOP and excitingly, our first proof-of-concept data for our long-acting neurotoxin in aesthetics. Christelle will provide more details on these as well as on the development of elafibranor in PBC and PSC in her section. Lastly, based on the solid momentum and the strong performance of this first half, we are pleased to upgrade our full year guidance. We now expect total sales growth greater than 7% at constant exchange rates and the core operating margin greater than 32%. Aymeric will provide more details in his section. Please turn to Slide 6. Our sales in H1 delivered a solid 11.4% growth, fueled by all 3 therapeutic areas with Q2 very much aligned with Q1 performance. Oncology has performed well with H1 sales growth of 6.4%. Rare Disease continued to have the most impressive performance driven by the sustained success of Iqirvo and the strong performance of Bylvay. Neuroscience with Dysport continued to deliver high single-digit growth. I now turn to Oncology for more details. Please turn to Slide 7. Starting with Somatuline, sales were up by 14.1%. Both Europe and the U.S. continued to benefit from shortages of generic lanreotide. We do anticipate more lanreotide generic competition with potential entry in the second half of the year. Cabometyx sales were slightly down by 0.2% with solid performance in Europe from increased volumes, offset by shipment phasing and increased competition in the rest of the world. We're confident that Cabometyx should continue to grow its market share in the current indication in renal cell carcinoma and progressively launch in the neuroendocrine tumor indications. Decapeptyl sales were up by 0.5% as we experienced volume growth in Europe and China despite continued competition and some pricing pressure in some countries. Onivyde sales grew by 6.5% with moderate growth in the U.S., driven by the first-line metastatic pancreatic ductal adenocarcinoma. We recognize that it will take time to drive first-line differentiation and address some challenges around access to payers. Now let's turn to Rare Disease. Please turn to Slide 8. On Rare Disease, Bylvay continues to perform nicely with H1 sales of EUR 87 million, growing by 53.7%, driven by strong demand in the U.S. and in Europe in both PFIC and Alagille Syndrome indications. We also had an increasing contribution from rest of world with access and reimbursement now secured in 17 countries. Turning to Iqirvo. The launch continues to track very well with sales reaching EUR 59 million this semester. In Q2, we saw an acceleration in the U.S. with a 65% growth quarter-over-quarter, driven by an increasing uptake from new patients and switches from Ocaliva. Europe was also very strong with sales mainly from Germany and the U.K. and launches initiated in Spain and Italy in June. Moving to Neuroscience. Let's turn now to Slide 9. Dysport delivered another solid performance with H1 sales growth of 9.7%. In aesthetics, sales grew by 17.5%, driven by continued expansion in most territories, including the U.S., Europe and Rest of World and by a strong performance from our partner, Galderma, who continued to gain market share in key countries and a solid growth in our Ipsen territories. On the therapeutic side, Dysport showed solid and consistent demand growth across all geographies. In the U.S., notably, we continue to gain market share in our spasticity indications with strong double-digit sales growth. Reported sales were, however, flat due to an adverse phasing of orders in Brazil. Supported by solid market growth in both indications and strong execution, we're confident that Dysport should continue to deliver high single-digit sales growth in the short, mid and long-term. Now I'd like to present the upcoming catalysts. Please turn to Slide 10. In the second half of 2025, we are expecting updates in Rare Disease and Neuroscience. Starting with Rare Disease, we should report the pivotal FALKON trial results for Fidrisertib in FOP. Secondly, in Neuroscience, we're expecting the proof-of-concept data readout for land in aesthetics. Looking ahead, 2026 is going to be a busy year for the pipeline with several anticipated Phase III data readouts across all 3 therapeutic areas, including for Bylvay, Iqirvo, Tazverik as well as migraine trial readouts for Dysport. With that, I'll now hand over to Christelle, who will provide more detail on our pipeline and those exciting milestones. Please turn to Slide 11.

Thank you, David. Good morning and good afternoon. Please turn to Slide 12. As David already mentioned, last week, we were delighted to receive the European Commission approval for Cabometyx in advanced pancreatic and extrapancreatic neuroendocrine tumors. This approval was based on the strong results of the CABINET study displayed here on the graph, which showed a significant improvement in median progression-free survival for patients treated with Cabometyx versus placebo. Working within the NET community for more than 35 years, we recognize that patients require multiple lines of therapy for this slow growing and chronic form of cancer. We are now focused on bringing this important treatment to patients. Please turn to Slide 13 and our pipeline. We continue to have a strong and differentiated pipeline that has advanced in all 3 therapeutic areas in the first half of 2025. In Oncology, we have established a strong expertise in the MAP kinase pathway, starting with tovorafenib, a second-generation RAF inhibitor and the FIREFLY-2 Phase III study in untreated pediatric low-grade glioma patients. IPN01195 our newest third-generation RAF inhibitor has entered the clinic in April, alongside IPN01194, which selectively inhibits ERK also in the MAP kinase pathway. Both IPN01194 and IPN01195 are being evaluated in a number of solid tumors. In Rare Disease, we continue to grow our rare liver portfolio, both in pediatric with Bylvay in biliary atresia and in adults, in PSC and PBC with Iqirvo. I will share more on the ELMWOOD study in a minute and also update you on the FALKON study in FOP. In Neuroscience, we continue to evaluate the potential of our portfolio in both chronic and episodic migraine. We've also just shared that we have added a fourth Phase II trial in our program with CATALPA evaluating IPN10200 in cervical dystonia. Please turn to Slide 14 for more details on the Rare Disease portfolio and starting with fibrodysplasia ossificans progressiva or FOP. FALKON is a Phase II registrational study evaluating the change in heterotopic ossification volume from baseline to 12 months and assessed by whole body CT scan. Importantly, Fidrisertib selectively inhibits the mutated form of ALK2 that is found to be a driver in FOP. We expect this data to read out in the second half of 2025. Please turn to Slide 15. With an update now on the rare liver disease portfolio. First, starting with primary biliary cholangitis. At the recent EASL meeting, we shared late-breaking data from the Phase III ELATIVE study for Iqirvo in PBC. Additional analysis showed that at week 52 of treatment, 67% of patients treated with elafibranor, had a clinically meaningful improvement in fatigue compared with 31% of patients treated with placebo. Importantly, this effect was also shown to be independent of the reduction in pruritus. Alongside these data, we presented evidence from a comprehensive proteomic analysis that showed the PPAR-alpha activation is linked to the fatigue improvement in PBC. Please turn to Slide 16. Moving into PSC. At EASL, we also shared the results of our Phase II ELMWOOD study, evaluating the safety and efficacy of elafibranor in primary sclerosing cholangitis, a rare liver disease that currently has no approved treatment options. In this study, elafibranor showed a favorable safety profile and demonstrated dose-dependent efficacy at 12 weeks versus placebo across a number of endpoints, in particular, significant improvement in liver biochemical parameters, including alkaline phosphatase shown on the graph on your left. In the center graph, stabilization of noninvasive markers, including enhanced liver fibrosis, ELF. Of note, the changes in ELF are greater in patients with moderate-to-severe fibrosis at baseline. And finally, the graph on the right shows a significant improvement in pruritus, and this was observed using the Worst Itch NRS score at the 120-week dose. We are now engaging with regulatory agencies to decide on the next steps of our clinical development program for this indication. Please turn to Slide 17. In Neuroscience, the next data readout is the LANTIC Phase II, a multistage dose escalation study, evaluating the safety and efficacy of IPN10200 in moderate-to-severe upper facial lines. The proof of concept is determined in the Stage 1, where we are evaluating IPN10200 in glabellar lines, and we expect these data in the second half of 2025. The Stage 2 of this study has already started and includes 4 head and lateral cancer lines. We are excited to see these results coming from the Stage 1 in the coming months and a positive proof of concept will support a Phase III start. I would now like to hand over to Aymeric Le Chatelier for the details of our H1 financials. Turn to Slide 18, please.

Thank you, Christelle, and hello, everyone. I will now take you through the detail of our financial performance in the first half of this year as well as our guidance for 2025. Please turn to Slide 19. We delivered another set of strong financial results in the first half across sales, core operating income and cash flow. Our total sales of EUR 1.8 billion grew by 11.4% at constant exchange rates. Our core operating income grew by 21.9% to EUR 656 million, in line with our free cash flow, increasing also by 22% to EUR 483 million. Given this strong performance and our solid balance sheet with no debt, we now have at the end of June an updated firepower available for external innovation of EUR 3 billion. Let's go more in the detail of those financials in the following slides. Please turn to Slide 20. Starting with the P&L to core operating income, the growth in total sales of 11.4% at constant exchange rate translated into 9.7% at current rates given the adverse currency movement, mainly from emerging markets. Gross margin increased by 2.1 percentage points, driven by a favorable product mix and higher other revenue from partners. R&D costs increased by 12.8% to reach a ratio of 20.1% of total sales, driven mainly by increased investment for Dysport in migraine, long-acting toxin in aesthetic and therapeutic and our early-stage oncology assets. SG&A costs increased by only 5.6% with a ratio to sales at 33.3%, improving by 1.3 percentage points, reflecting our commercial investment to support the launches, but also the impact of our efficiency programs. As a consequence, our core operating income increased by 21.9% with the core operating margin standing at 36% of sales, an improvement of 3.6 percentage points. Please turn to Slide 21. IFRS operating income and consolidated net profit increased both by more than 40%, thanks to lower restructuring and other operating expenses, lower financial expenses and despite impairment losses recognized for EUR 53 million in relation with discontinued early-stage assets as well as slightly higher income tax. Please turn to Slide 22. Finally, on cash flow, we continue to generate strong free cash flow this year and have a strong balance sheet with a cash position of EUR 488 million at the end of June. Free cash flow increased by 22.8%, driven by EBITDA growth, sound management of capital expenditures and working capital. Net investment included payments related to regulatory and commercial milestones. With a net cash position of EUR 488 million at the end of June and based on a maximum 2x net debt to EBITDA, we have a firepower of EUR 3 billion available for external innovation. Let's now move to 2025 guidance and turn to Slide 23. Based on this solid momentum in the first half of the year and that very strong performance, we are pleased to upgrade our full year 2025 guidance. First, we expect total sales to grow by more than 7% at constant exchange rate as compared to our previous guidance of sales growth above 5%. We assume also a negative impact of 2 points from currencies based on the latest exchange rate during the month of June. This guidance assumes, as indicated by David, a negative impact in H2 on Somatuline sales in the U.S. and in Europe with a progressive resupply from the current generic and a potential entry of additional generic. On the other side, we expect an accelerated sales growth from the rest of the portfolio, driven by the significant ramp-up of Iqirvo in the U.S. and in Europe as well as the growth of Cabometyx. On the other hand, we anticipate now a core operating margin greater than 32% of total sales as compared to more than 30% in our previous initial guidance. It assumes, however, a lower level of profitability in the second half of the year, including additional R&D expenses from potential early or mid-stage external innovation opportunity, additional commercial investment to support our launches and a lower level of other revenue than in the first half of the year. With all of that, I will now hand over back to David. Please turn to Slide 24.

Thank you, Aymeric. I will now move to the conclusion. Please turn to Slide 25. We continue to deliver strong momentum and remain firmly on track to achieve our ambitions. I'd like to leave you with 3 key messages. First, we intend to continue growing our top line, fueled by the performance of our existing portfolio and launches. This consistent growth reflects our focus on execution and our ability to deliver across both commercial and medical fronts. Second, we remain committed to continuing our R&D investments and growing our internal pipeline while investing to support our current and future commercial launches. Finally, we have a significant firepower to pursue external innovation. We remain disciplined but ambitious, and we are well positioned to seize the right opportunities to further strengthen our portfolio. With that, please turn to Slide 26. This concludes our presentation, and we will now take your questions. Operator, over to you.

[Operator Instructions] Our first question comes from the line of Richard Vosser from JPMorgan.

Two questions, please. Just one on Somatuline. It seems like generics are always going to have supply issues. So at what point do you think we can think about a substantial residual tail to the business? Where might that be? How should we think about the outlook maybe beyond '25 for '26 and I suppose the profitability of the business during that period? And then a second question on Iqirvo launch. Just obviously going very strongly, how should we think about that and the level of use maybe off-label in other indications that might come through going forward in the coming months?

Thanks a lot, Richard. On your first question, I mean, I have to say, first of all, we're very pleased with our performance on Somatuline, and it also shows that it is a very difficult to produce compound. So we have observed that Pharmathen is only coming back very slowly, delivering to Advanz in Europe and Cipla. So they're slightly increasing. And on Sun Pharma, which had the approval last year in October, we don't see them on the market. Now they are telling the market that they might come towards the second half in Europe. In the U.S., we have not heard anything. So it's correct that Somatuline is holding up very nicely, but we just want to be careful. Perhaps one day, they are going to figure out how to produce it, and we will see a somewhat accelerated erosion. That's all I can say because we're not inside the production buildings of these companies, and it's hard to say how well they are doing on eventually ramping up. So I would assume that there is going to be a tail in the future even because of those reasons that it's so hard to produce. On Iqirvo, we are, as you said, on a really nice trajectory. We are off to a great launch in the U.S., but also outside of the U.S. We have had outside of the U.S., a substantial advance versus Gilead. And we have also seen the withdrawal of Ocaliva in Europe. So that has accelerated things for sure. And we have been able to capture a lot of switch patients as well. And we're only about to launch now in other large markets. We just got the reimbursement in June in Italy and also in Spain. So we are ramping up there. So things are going very well. In terms of off-label use, PSC, I guess, you would allude to because we have shown results in May at the EASL conference, which look very promising, and we are going to discuss these results with the FDA and potential way forward in PSC. But I can't really comment on off-label. As you know, we are not promoting it, obviously. We can only have scientific exchanges through our MSLs when we get questions. But so far, so good. I mean there is a lot of enthusiasm on Iqirvo. And we also have shown new fatigue data. We analyzed the data with proteomics. And we believe the PPAR-alpha effect is actually linked to this fatigue effect, which is totally independent from pruritus. So that's also encouraging data. So I'm very positive on Iqirvo, I have to say. Thanks a lot for your question.

next, we have Xian Deng from UBS.

And just 2, please. The first one on Cabometyx. Now you've got the NET approval in Europe. So just wondering how should we think about the cadence in the second half? Roughly when are you thinking to launch? Can you actually launch immediately given this is actually a drug that's already on market, so we should expect already uptick from Q3 or this is more going to be back-end loaded? So that's the first question. And second one on Dysport, please. Just wondering what's the latest underlying trends in aesthetics that you've been seeing? Have you seen any softness in the U.S. from macroeconomics and anything else?

Thank you for your questions. On Cabometyx, obviously, we're very enthusiastic now launching into neuroendocrine tumor. This is an area that we know very well, obviously, because we have had a very long legacy with Somatuline in this. We know the KOLs very well. We can launch in Germany, as you know, immediately because you can launch when you have the approval in Europe in Germany. And then for the other markets, we will have also some payer discussions. And it sometimes takes up to 12 months with payers in Europe outside of Germany to actually get the reimbursement, and then we're going to be ready to launch there as well. On Dysport, your question on the trend in Ax, we don't really see a softening in the U.S. We see that our partner, Galderma is doing an excellent job in the U.S., gaining market share, but also outside of the U.S. gaining market share. And we see a similar trend in the territories that we have in aesthetics, where we also see a nice growth. So as I said, on this part, we expect short, mid, long-term, really nice growth in aesthetics, but also in therapeutics. So next question, please.

next, we have Victor Floch from BNP.

Maybe first on Iqirvo. I was wondering if you could comment on the potential next step in PSC. And I guess it's mainly tied to the Iqirvo IP situation. So -- if so, what are your options to meaningfully extend Iqirvo LOE? And if you can do it, what would be the other indication you would be looking at? And my second question on the LANTIC readout later this year. Any chance you could remind us what data you are expecting to share in the second part of the year? So I can understand it's going to be limited to the Stage 1. And so can you confirm that out of those Stage 1 data, it will be enough to have a clear view on the asset duration of action?

Okay. Thank you, Victor. On Iqirvo regarding next steps on PSC, as I said, I mean, we have presented the data, which was very encouraging, not just on ALP, but also on the fibrosis, which is what you want to see in PSC. So we are going to have a discussion with FDA in terms of potential trial design. On IP, as you know, we have orphan drug designation, but there is also method of use patents. So if you would, for example, get an approval in PSC and since this is a different dose, it's 120 milligram, we could also get another orphan drug protection there. And so this is what we are right now discussing. Regarding the LANTIC data, I will ask Christelle to comment.

Thank you. Victor. So yes, indeed, we're reading out the Stage 1 of our LANTIC study that looks at the safety and efficacy in glabellar line. And this study has a design that includes a follow-up of both our primary and secondary endpoints out to 6 and 9 months. We're very excited to see that data coming, but it's too early to comment on the outcome of the study. But you have the design that gives you an idea of what we're really looking for a differentiation at a longer duration of action that we've built in our study.

Next, we have Charles Kings from Barclays.

Two focusing just on your Neurology portfolio. Firstly, a quick one on Dysport and the therapeutic. Wondering if you could just quantify that phasing impact from Brazil on your therapeutic results. I'm just wondering if that should unwind over 2H '25 to kind of bring you back in line with that high single-digit flat top line growth you're targeting? And then secondly, as far as the kind of long-acting neurotoxin strategy, can you give us a quick update on what the latest is as far as the arbitration with Galderma is? And then thinking maybe just a bit more holistically, what is the kind of long-term goal here? Assuming you're successful with the arbitration, do you see value in trying to produce your own distribution network for the aesthetic indications? Or would you try and continue to leverage Galderma's distribution network? And what are the associated investments that would be required to do that? And just a kind of connection to the investment on LANT, like can you give us any breakdown of the impact of higher R&D costs in 2H as to why you're expecting a step down in that EBIT margin for the full year guide?