Earnings Release • Sep 18, 2017
Earnings Release
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Marseille, France, September 18, 2017, 7:00 AM CEST
Innate Pharma SA (the "Company" - Euronext Paris: FR0010331421 – IPH) today reports its consolidated financial results for the first half of 2017. The summary of the condensed halfyear consolidated financial statements is attached to this press release.
During the period, Innate Pharma has continued to make significant progress across its portfolio of first-in-class clinical antibodies designed to harness the innate immune system.
In June 2017, Innate Pharma presented results from the dose-escalation part of the Phase I trial evaluating IPH4102 at the ICML2. The data reported suggest that IPH4102 is well tolerated and shows promising signs of clinical activity in elderly and heavily pretreated patients with advanced cutaneous T-cell lymphomas (CTCL), which is an orphan disease, mostly with Sézary syndrome, a subtype with high unmet medical need. Innate Pharma is currently working on the next steps of the clinical development plan for IPH4102 and will present updated data of the ongoing Phase I trial at the EORTC CLTF3 meeting in London in October.
In March, the protocol of the ongoing Phase I/II study evaluating lirilumab, led by Bristol-Myers Squibb, was amended and expanded to include additional cohorts of Opdivo (nivolumab) plus lirilumab in solid tumors, including a cohort exploring Opdivo with or without lirilumab in squamous cell carcinoma of the head and neck (SCCHN) and initial testing of the triplet combination of Opdivo, Yervoy (ipilimumab) and lirilumab in solid tumors.
Finally, in June, Innate Pharma entered into an agreement with Novo Nordisk A/S granting the Company full worldwide exclusive rights to develop and commercialize a first-in-class clinicalstage anti-C5aR antibody, now called IPH5401. IPH5401 complements Innate Pharma's current clinical-stage immuno-oncology pipeline and reinforces the Company's position in the
1 Including current and non-current financial assets 2 International Conference on Malignant Lymphoma
3 European Organisation for Research and Treatment of Cancer Cutaneous Lumphoma Task Force Meeting
field of tumor microenvironment beyond the adenosine pathway. Innate plans to start clinical trials with IPH5401 in oncology in 2018.
Mondher Mahjoubi, Chief Executive Officer of Innate Pharma, commented: "We are continuing to leverage our deep scientific expertise in innate immunity to build a fullyintegrated biopharmaceutical company with a growing portfolio of first-in-class programs. We have made great progress across key programs during the first half of 2017. The data presented for IPH4102 give us confidence to move this proprietary product into the next stage of clinical development. Moreover, I am proud that we could significantly strengthen our pipeline through the acquisition of IPH5401 from Novo Nordisk A/S and we look forward to advancing this first-in-class asset into the clinic in 2018."
Dial in numbers:
France and International: +33 (0)1 72 72 74 03 US only: +1 844 286 0643 PIN code: 20472515#
The slideshow of the presentation will be made available on the Company's website 30 minutes before the conference begins.
A replay will be available on Innate Pharma's website after the conference call.
The key elements of Innate Pharma's financial results for the first half of 2017 are as follows:
The table below summarizes the IFRS consolidated financial statements for the six-month period ended June 30, 2017, including 2016 comparative information.
| In thousands of euros, except for data per share | June 30, 2017 | June 30,2016 |
|---|---|---|
| Revenue and other income | 21,274 | 20,685 |
| Research and development | (31,583) | (20,273) |
| General and administrative | (7,922) | (3,339) |
| Net Operating expenses | (39,505) | (23,612) |
| Operating income/(loss) | (18,231) | (2,927) |
| Financial income | 1,216 | 1,835 |
| Financial expenses | (6,344) | (2,080) |
| Net loss | (23,359) | (3,171) |
| Weighted average number of shares outstanding (in thousands) | 53,955 | 53,853 |
| Net loss per share | (0.43) | (0.06) |
| June 30, 2017 | December 31, 2016 | |
| Cash, cash equivalents and financial assets4 | 204,115 | 230,664 |
| Total assets | 246,384 | 281,577 |
| Shareholders' equity | 68,909 | 86,169 |
| Total financial debt | 4,661 | 5,327 |
Lirilumab is a fully human monoclonal antibody that is designed to block the interaction between KIR2DL-1,-2,-3 inhibitory receptors and their ligands. Blocking these receptors facilitates activation of NK cells and potentially some subsets of T cells, ultimately leading to the destruction of tumor cells.
Lirilumab is being evaluated by Bristol-Myers Squibb in clinical trials in combination with other agents in a variety of tumor types.
• In January 2017, the Company announced that, as per the licensing agreement for lirilumab, Bristol-Myers Squibb paid Innate Pharma a US\$15 million milestone payment for the continued exploration of lirilumab in combination with Opdivo. The milestone payment followed the presentation of encouraging preliminary activity results from a Phase I/II trial in a cohort of patients with SCCHN presented in November 2016 at the SITC5 annual meeting.
4 Current and non-current
5 Society for Immunotherapy of Cancer
Monalizumab is a first-in-class immune checkpoint inhibitor targeting NKG2A receptors expressed on tumor infiltrating cytotoxic CD8 T lymphocytes and NK cells.
This monoclonal antibody is currently being tested in an exploratory program of Phase I or I/II clinical trials in various cancer indications in monotherapy and combinations.
6 A randomized, double-blind, placebo-controlled Phase II trial testing the efficacy of lirilumab as a single agent maintenance treatment in elderly patients with acute myeloid leukemia in first complete remission.
infiltrated lymphocytes (TILs) expressing high levels of PD-1 co-expressed high levels of NKG2A, raising the possibility that NKG2A blockade may potentiate PD-1/PD-L1 blockers by directly enhancing CD8+ T cell-mediated killing of tumors.
IPH4102 is a first-in-class cytotoxicity-inducing antibody currently being tested in a Phase I clinical trial for the treatment of cutaneous T-cell lymphomas ("CTCL"), in particular their aggressive forms, Sézary syndrome and transformed mycosis fungoides.
IPH5401 is a first-in-class therapeutic antibody that specifically binds and blocks C5a receptors (C5aR) expressed on subsets of myeloid-derived suppressor cells (MDSC) and neutrophils. Part of the innate immune system, these types of cells promote tumor growth by secreting inflammatory and angiogenic factors, and they potently suppress anti-tumor T and NK cells, and hamper the activities of PD-1 checkpoint blockers. C5a, a factor in the complement cascade, is often overexpressed in tumors, where it attracts and activates MDSC and neutrophils in the tumor microenvironment.
7 In CTCL, global clinical response assessment is a composite of response evaluation in all organs involved with tumor cells, such as skin, blood, lymph nodes and viscera (E. Olsen et al, JCO 2011).
As at June 30 2017, the headcount was 171 employees.
About Innate Pharma:
Innate Pharma S.A. is a clinical-stage biotechnology company dedicated to improving cancer treatment and clinical outcomes for patients through first-in-class therapeutic antibodies that harness the innate immunity.
Innate Pharma specializes in immuno-oncology, a new therapeutic field that is changing cancer treatment by mobilizing the power of the body's immune system to recognize and kill cancer cells.
The Company's broad pipeline includes four first-in-class clinical stage antibodies as well as preclinical candidates and technologies that have the potential to address a broad range of cancer indications with high unmet medical needs.
Innate Pharma has pioneered the discovery and development of checkpoint inhibitors, with a unique expertise and understanding of Natural Killer cell biology. This innovative approach has resulted in major alliances with leaders in the biopharmaceutical industry including AstraZeneca, Bristol-Myers Squibb, Novo Nordisk A/S and Sanofi. Innate Pharma is building the foundations to become a fully-integrated biopharmaceutical company.
Based in Marseille, France, Innate Pharma has more than 170 employees and is listed on Euronext Paris.
Learn more about Innate Pharma at www.innate-pharma.com
Information about Innate Pharma shares:
| ISIN code | FR0010331421 |
|---|---|
| Ticker code | IPH |
This press release contains certain forward-looking statements. Although the company believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those anticipated. For a discussion of risks and uncertainties which could cause the company's actual results, financial condition, performance or achievements to differ from those contained in the forward-looking statements, please refer to the Risk Factors ("Facteurs de Risque") section of the Document de Reference prospectus filed with the AMF, which is available on the AMF website (http://www.amf-france.org) or on Innate Pharma's website.
This press release and the information contained herein do not constitute an offer to sell or a solicitation of an offer to buy or subscribe to shares in Innate Pharma in any country.
For additional information, please contact:
Dr Markus Metzger / Jérôme Marino Investor relations
Tel.: +33 (0)4 30 30 30 30
Mary-Jane Elliott / Jessica Hodgson / Philippa Gardner Tel.: +44 (0)20 3709 5700 [email protected]
ATCG Press Marie Puvieux Mob: +33 (0)6 10 54 36 72 [email protected]
Statement of financial position (in thousand euros)
| June 30, 2017 | December 31, 2016 | |
|---|---|---|
| Assets | ||
| Cash and cash equivalents | 151,003 | 175,906 |
| Short-term investments | 20,481 | 21,782 |
| Current receivables | 24,288 | 32,390 |
| Total current assets | 195,772 | 230,078 |
| Intangible assets | 7,720 | 9,075 |
| Tangible assets | 9,834 | 9,094 |
| Non-current financial assets | 32,631 | 32,975 |
| Other non-current assets | 427 | 355 |
| Total non-current assets | 50,612 | 51,499 |
| Total assets | 246,384 | 281,577 |
| Liabilities | ||
| Trade payables | 18,182 | 20,265 |
| Financial liabilities – Current portion | 1,202 | 1,264 |
| Deferred revenue – Current portion | 56,643 | 54,912 |
| Total current liabilities | 76,027 | 76,441 |
| Financial liabilities – Non-current portion | 3,459 | 4,063 |
| Defined benefit obligations | 2,422 | 2,418 |
| Deferred revenue – Non-current portion | 95,065 | 112,348 |
| Provisions | 502 | 136 |
| Total non-current liabilities | 101,448 | 118,965 |
| Share capital | 2,701 | 2,696 |
| Share premium | 193,194 | 187,571 |
| Consolidated reserves | (103,594) | (116,235) |
| Net income (loss) | (23,359) | 12,640 |
| Other reserves | (33) | (503) |
| Total shareholders' equity attributable to |
68,909 | 86,169 |
| equity holders of the Company | ||
| Total liabilities and equity | 246,384 | 281,577 |
| June 30, 2017 | June 30, 2016 | |
|---|---|---|
| Revenue from collaboration and licensing agreements | 15,554 | 16,659 |
| Government financing for research expenditures | 5,720 | 4,025 |
| Revenue and other income | 21,274 | 20,685 |
| Research and development | (31,583) | (20,273) |
| General and administrative | (7,922) | (3,339) |
| Net operating expenses | (39,505) | (23,612) |
| Operating income (loss) | (18,231) | (2,927) |
| Financial income | 1,216 | 1,835 |
| Financial expenses | (6,344) | (2,080) |
| Net income (loss) before tax | (23,359) | (3,171) |
| Income tax expense | - | - |
| Net income (loss) | (23,359) | (3,171) |
| Net income (loss) per share attributable to the equity holders of the Company: (in € per share) |
||
| - basic - diluted |
(0.43) | (0.06) |
| (0.43) | (0.06) |
| June 30, 2017 | June 30, 2016 | |
|---|---|---|
| Net income (loss) | (23,359) | (3,171) |
| Depreciation and amortization | 2,127 | 1,563 |
| Provisions for defined benefit obligations | 190 | 460 |
| Provisions for charges | 366 | - |
| Share-based payments | 5,177 | - |
| Variance of depreciation on financial assets | (218) | (600) |
| Foreign exchanges (gains) / losses on financial instruments |
2,682 | 1,027 |
| Variance on accrued interests on financial instruments | (84) | (152) |
| Gains on assets and other financial assets | (421) | (748) |
| Net interests paid | 58 | 65 |
| Operating cash flow before change in working | (13,482) | (1,555) |
| capital | ||
| Change in working capital | (9,591) | (20,513) |
| Net cash generated from / (used in) operating |
(23,072) | (22,067) |
| activities: | ||
| Purchase of intangible assets | (181) | (7,740) |
| Purchase of tangible assets | (1,314) | (1,018) |
| Disposal of tangible assets | 39 | |
| Purchase of current financial assets | - | (9,469) |
| Purchase of non-current financial assets | (500) | (1,527) |
| Disposal of current financial assets | - | 48,198 |
| Disposal of non-current financial assets | 4 | - |
| Purchase of other non-current assets | (71) | - |
| Gains on other financial assets | 421 | 748 |
| Net cash generated from / (used in) investing activities: |
(1,601) | 29,193 |
| Transactions on treasury shares | - | 14 |
| Issue of own shares | 450 | 141 |
| Repayment of financial liabilities | (667) | (240) |
| Net interests paid | (58) | (65) |
| Net cash generated from financing activities: | (274) | (150) |
| Effect of the exchange rate changes | 44 | 7 |
| Net increase / (decrease) in cash and cash |
(24,903) | 6,982 |
| equivalents: | ||
| Cash and cash equivalents at the beginning of the period: |
175,906 | 152,870 |
| Cash and cash equivalents at the end of the period: | 151,003 | 159,852 |
The following table summarizes operating revenue for the periods under review:
| In thousands of euros | June 30, 2017 | June 30, 2016 |
|---|---|---|
| Revenue from collaboration and licensing agreements | 15,554 | 16,659 |
| Government funding for research expenditures | 5,720 | 4,025 |
| Revenue and other income | 21,274 | 20,685 |
Revenue from collaboration and licensing agreements for the first half of 2017 entirely stems from the agreement signed with AstraZeneca. The related revenue decreased by €0.6m, resulting from the fall in the costs related to this agreement (the initial payment being recognized on the basis of the recognized costs).
For the first half of 2016, the line item also included revenue relating to the agreement signed with Bristol-Myers Squibb.
Government funding for research expenditures are mainly composed of research tax credit (€5.7m for the first half of 2017 compared to €4.0m for the first half of 2016). This variance results from the following:
Each of these two elements had a positive impact of €0.8m.
The research tax credit relating to the fiscal year 2016, amounting to €9.1m, was collected in July 2017 after deduction of the corporate tax relating to the same fiscal year (€0.3m).
The following table breaks down the operating expenses by function for the six-month period ended June 30th, 2017, compared to 2016's first half:
| In thousands of euros | June 30, 2017 | June 30, 2016 |
|---|---|---|
| Research and development expenses | (31,583) | (20,273) |
| General and administrative expenses | (7,922) | (3,339) |
| Operating expenses | (39,505) | (23,612) |
Research and development ("R&D") expenses include the cost of employees assigned to research and development operations (including employees assigned to work under the collaboration and licensing agreements), subcontracting costs (research, preclinical development and clinical development) as well as costs of materials (reagents and other consumables) and pharmaceutical products.
The increase in R&D expenses between the two periods under review (€31.6m as of June 30, 2017 compared to €20.3m as of June 30, 2016, or +56%) mainly resulted from both higher subcontracting costs (+€5.9m) and share-based compensation expenses (+€2.2m, non-cash item). Higher subcontracting costs were mainly driven by IPH4102 (+€4.2m).
R&D expenses accounted for 80% of operating expenses for the six-month period ended June 30, 2017 (2016: 86%).
General and administrative ("G&A") expenses mostly comprise costs of the "support" staff as well as external expenses for the management and development of our business. The rise in costs mainly resulted from an increase in share-based compensation (+€3.0m, non-cash item), non-scientific advisories (+€1.2m) and staff costs other than share-based compensation (+€0.5m).
G&A expenses accounted for 20% of operating expenses for the six-month period ended June 30, 2017 (2016: 14%).
During the second half of 2016, the Company granted some equity instruments to its employees, including to Mr. Mahjoubi following his appointment as Chairman of the executive board. Given these instruments include an acquisition period (one or three years), their fair value is spread over the relevant period according to IFRS 2. There was no share-based compensation expense for the first half of 2016. Indeed, the instruments granted in 2015 did not include any acquisition period. Consequently, their fair value was entirely recognized in 2015.
The following table breaks down the operating expenses by function for the six-month period ended June 30th, 2017, compared to 2016's first half:
| In thousands of euros | June 30, 2017 | June 30, 2016 |
|---|---|---|
| Costs of supplies and consumable materials | (1,900) | (1,568) |
| Intellectual property expenses | (899) | (654) |
| Other purchases and external expenses | (21,627) | (13,885) |
| Employee benefits other than share-based compensation | (7,540) | (5,363) |
| Share-based payments | (5,177) | - |
| Depreciation and amortization | (2,128) | (1,563) |
| Other income and (expenses), nets | (234) | (580) |
| Operating expenses | (39,505) | (23,612) |
The changes in the most significant line items can be analyzed as follows:
these instruments were deferred and recognized as expenses during the acquisition periods. This expense is a non-cash item.
Financial income is mainly composed of interest related to cash, cash equivalents and financial assets.
Financial expenses for the first half of 2017 are mainly composed of exchange losses (€6.2m), resulting from the recovery of the Euro versus the U.S. dollar as of June 30, 2017 compared to December 31, 2016. This variance had an adverse impact on the valuation in Euro of the cash, cash equivalents and financial assets held in U.S. dollar in order to face the expenses expected to be paid in U.S. dollar.
Cash, cash equivalents and financial assets (current and non-current) amounted to €204.1m as of June 30, 2017, as compared to €230.7m as of December 31, 2016. Cash and cash equivalents do not include the reimbursement of the 2016 research tax credit which was collected in July 2017 (€9.1m). Consequently, the amount of net cash as of June 30, 2017 amounted to €170.3m (€196.4m as of December 31, 2016). Net cash is equal to cash, cash equivalents and current financial assets less current financial liabilities.
Since its incorporation in 1999, the Company has been primarily financed by revenue from its out-licensing activities (mostly in relation to the agreements with Novo Nordisk A/S and Bristol-Myers Squibb) and by issuing new shares. The Company also generated cash from government financing for research expenditure (zero interest loan for innovation) and noninterest-bearing repayable advances (BPI France). As of June 30, 2017, these repayable advances amount to €1.2m, of which €0.3m classified as current financial liabilities and €0.9m as non-current financial liabilities.
The other key balance sheet items as of June 30, 2017 are as follows:
The net cash flow consumed over the six-month period ended June 30, 2017 amounted to -€24.9m, compared to a net cash flow of +€7.0m generated for the same year-ago period. Net cash flows generated during the first half of 2016 mainly resulted from the disposal of current financial instruments.
The cash flow generated during the period under review mainly results from the following:
• To cope with the midterm increase in its staff and activities, the Company initiated a project regarding the construction of a new building and obtained a building permit in March 2017. On July 3, 2017, the Company subscribed for a loan from Société Générale in order to finance the building of its future headquarters. The maximum amount of this
loan is €15.2m. Meanwhile, the Company examines the expansion and reorganization of its current premises to handle short-term staff increase.
The interim consolidated financial statements for the six-month period ended June 30, 2017 have been subject to a limited review by our Statutory Auditors and were approved by the Executive Board of the Company on September 12, 2017. They were reviewed by the Supervisory Board of the Company on September 15, 2017. They will not be submitted for approval to the general meeting of shareholders.
Risk factors identified by the Company are presented in paragraph 1.9 of the registration document ("Document de Référence") submitted to the French stock-market regulator, the "Autorité des Marchés Financiers", on March 31, 2017 (AMF number D.17-0282). The main risks and uncertainties the Company may face in the six remaining months of the year are the same as the ones presented in the registration document available on the internet website of the Company. Not only may these risks and uncertainties occur during the six months remaining in the financial year but also in the years to come.
Transactions with related parties during the periods under review are disclosed in Note 18 to the interim consolidated financial statements prepared in accordance with IAS 34 revised.
No material transaction was concluded with a member of the executive committee or the Supervisory Board following the date of the 2016 registration document.
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