Mondher Mahjoubi - CEO Laure-Hélène Mercier - CFO Pierre Dodion - CMO Nicolai Wagtmann - CSO.

Michael Schmidt - Leerink Partners Swayampakula Ramakanth - HCW Mick Cooper - Trinity Delta.

Ladies and gentlemen, welcome to the Innate Pharma Conference Call. I’ll now hand over to Mondher Mahjoubi, CEO. Sir, please go ahead..

Thanks very much. Good morning, good afternoon everyone, and thank you for joining us for our full year results conference call.

Innate Pharma issued this morning a press release detailing our full year results, if you've not seen it yet please go to our website innatepharma.com; you'll also find the presentation that you can follow and which will then summarize prepared remarks of today's call.

On the call today with me I have Laure-Hélène Mercier, our Chief Financial Officer. As most of you will be aware Laure-Hélène was appointed Chief Financial Officer in December 2016. She was previously Executive VP Finance, in-charge of financial operations and before that she was Head of Investor Relations.

I will give you an introduction to this call and the quicker review of our progress in 2016 as well as an upcoming newsflow.

Next slide, we'll provide the summary of our financial achievement in 2016 and we will then open the call to questions-and-answer and we'll have with me Pierre Dodion, our Chief Medical Officer; and Nicolai Wagtmann, our Chief Scientific Officer who will participate in the Q&A session.

As a reminder, during today's call we'll make forward-looking statement based on our current expectation, our actual results may differ materially from such statement.

Please go to Slide number 4, most of you follow the Company closely and I would like to focus on the most strategic aspect of 2016 which has been very important year for Innate Pharma in three respects.

First and most importantly, the initial reporting of very encouraging and potential clinical benefits of two of our first-in-class molecules, lirilumab in combination with nivolumab and a cohort from the Phase I/II trial of patient with head and neck cancer and IPH4102 and a dose escalation trial in patient with advanced form cutaneous T-cell lymphomas.

Those data are very important milestone for Innate Pharma and a very important step in our growth and development. It gives us confidence in our positioning science and prospect and renewed the ambition to build on this.

Second, the expansion of our preclinical pipeline of innovative operated candidates along with the development of new technology like the bispecific or the antibody-drug conjugate.

Third and last, the change in governance with the implementation of a plan to build on a science driven foundation of the Company towards the more patient-centric organization focused on late stage development and the commercialization on the horizon.

My appointment was a key step in putting the strategy into place and of the two months at Innate Pharma I can say that we're all very enthusiastic as we move forward to this very ambitious goal. There has been some key progress with our other programs in 2016. We reported first safety data with monalizumab as a single agent in gynecologic cancers.

We entered pre-IND development with IPH4301, our first-in-class anti-MICA/B and we've made significant progress on other projects and technology consolidate in the basis for our growth.

Move to Slide 5 please, early 2017 we also announced and received a new milestone payment from our partner BMS for the continued exploration of lirilumab in combination with nivolumab. We also announced the negative top line results from our Phase II trial of lirilumab as a single agent in maintenance for patient with acute myeloid leukemia.

Slide 6 provides you an overview of the expected newsflow that we have in 2017, and we'll continue to build on this foundation that I just mentioned. First of all from the liri/nivo combination in head and neck; as you know that it is in the hands of our partner BMS, but we're cautiously optimistic that these could happen in the course of 2017.

As you remember at Citi end of last year, BMS presented the first set of data from this combination. It is likely to expect an update on those data towards the end of the year. We'll have certainly safety data from the monalizumab clinical program in combination with durvalumab as well as other molecules that we're running as [indiscernible].

And very importantly I'm also thinking of advancing our program IPH4102, as you know this is a wholly owned asset. Two of pivotal stage and activate its clinical development in segments of the cutaneous T-cell lymphoma with the highest unmet medical need i.e. Sézary syndrome.

Because these are great ambitions one of my first roles at Innate Pharma will be to leave the organization so it can sustain and favor that growth. I believe that we have a great team, great tie ups and great partner and we can make that happen.

I would like now to handover to Laure-Hélène to discuss our financial position that is also one of our strength for building in the future.

Laure-Hélène?.

Thank you, Mondher for the introduction. And thank you everyone for joining us today. So, you've all seen our figures for the year that we remind you off on Slide 8, and notably that's 2016 is marked by a sharp increase in our revenue line as well as in the expenses.

And I will quickly comment on both before going to our key metrics which will as you know their cash position. On Slide 9 with regards to the revenue line as usual in IFRS, there are two main sources revenues from license and collaboration agreements and government financing for research expenditures.

The revenues from collaboration and licensing agreements increased dramatically in 2016 from €18 million in '15 to €56. That is related to two separate items.

One is the recognition of the initial payment of $260 million received from the signing of the agreement with AstraZeneca in July 2014 and which is recognized over the course of the clinical trials of the co-development and commercialization agreement.

And because this program was implemented mainly in '15, we're now recognizing at full pace hence the increase in revenue line. Remember that this is non-cash item and the initial payment has been fully received in 2016.

The second item is a milestone payment of $15 million that’s what Mondher alluded too and that we invoiced to BMS with a mass return at the end of 2016.

That was in relation with the Phase I/II trial of lirilumab in combination with nivolumab in solid tumors and these as you see has a cash impact, but note that we received this milestone in January 2017 and this is not included in our end of year cash position.

And as a reminder in 16, we had received a $5 million milestone from that same agreement with Bristol-Myers Squibb. Our source of revenue is the government financing for research expenditures and this is mainly that is expected. It amounts to €9.6 million in 2016 compared to €7.2 million in 2015.

So all in all, you can see that the increase in the revenue line is related on one hand to the operational progress in the development of monalizumab that triggers the recognition of the insured payments and on the other hand to the progress of lirilumab with milestone payments. I now turn to the entries on Slide 10.

You will see an important considers as well from €36 million to €58 million.

Obviously that is mainly driven by our reduction development cost that account for 84% of all cost, and they saw a progression of 63% from €30 million to €49 million, and that is consequence of the progress in our pipeline mostly our clinical programs monalizumab and IPH4102.

Again, the clinical programs of monalizumab and IPH4102 were mainly put in place in 2016 rather at the end of the year, and they are now running at full pace in 2016.

We are also investing in our internal capabilities to support our growing activities, that is part also of the increased industrial expense in R&D and as an example of the growth of these activities our headcount increased from 118 to 154 over a year.

If you go to Slide 11, I would give you a quick word on our financial income which increased from €4.1 million to €5.4 million in accordance with an increased average cash position over the year 2016, since again we received the initial payment from our AstraZeneca that makes the bulk of our cash position in June 2015, so obviously received the interest on high speed year only.

We ended year with positive net income before tax of 13 million first in [indiscernible] and as a reminder, the Company is subject to a 15% tax rate as its revenue obtained from intellectual property. Also remember that this abstract credit is not submitted to taxes.

Hence the tax amount was €0.3 million and our net result was €12.6 million compare to a loss of €6.7 million in 2016. In 2016, this positive net income was mainly driven by event-led milestone and therefore we cannot guarantee this financial result would be repeatable in 2017.

So, now let me turn to some items of our balance sheet and work importantly to our cash position on Slide 12. We end the year with the cash position of €231 million from the burn rate of 2016 has therefore been 43 million.

Again, this cash position doesn’t include the milestone payments from BMS of $15 million which we invoiced and recognized in the P&L end of '16, but cashed in beginning of '17. In front of this as you know, we've a €5.4 million debt mostly related to some lease financing for our premises and also to some lab equipment that we acquired in 2016.

So, you can see that why you should expect our cash balance to increase as we continue to invest to support the Company's strategies that Mondher has outlined.

We have a safe cash position and given our strategy with multiple partners, we could receive significant additional milestone payment in the near term as exemplified by the recent milestone payments from Bristol-Myers Squibb. So, we ended year with the safe cash position in context of our future growth. With this, I'll turn back to operator Mondher..

Thank you, Laure-Hélène. I think we're now happy to take your question and I'll let Nakheel [ph] our operator, operate now and hand over to her..

Thank you very much, sir. [Operator Instructions] The first question is coming from Mr. Michael Schmidt, Leerink Partners. Please go ahead sir..

I had one on IPH4102.

Can you just talk about through your development plan for the next upcoming steps and if there's something that you consider for an accelerated approval pathway potentially in CTCL?.

I'm going to quickly address it, but handover to Pierre to give you a little bit more kind of color. As you know, we presented the first set of results end of last year. Usually at this stage of the Phase I, you're still at the very kind of lower dose level.

We don't present data because we're still in kind of escalation phase, but we're with the industry get us quite delighted by the level of activity we've seen from the first dose levels that's why we presented this data.

I think as you can imagine the dose escalation continued, and we're confident that sometime in the second quarter we'll end up with the recommended dose for the rest of the program.

What I can say is that the level of activity along with the safety profile that we have absorbed and communicated end of last year is very encouraging for this subset of patients. As we know, these are heavily precluded patients most of them actually were with the most advanced form of CTCL, the Sézary syndrome.

They have received many line of therapy and yet we absorbed the response rate in the range of 40%, which is very-very encouraging of course. We need to have a little bit more follow-up and eventually little bit more patients to get much better clarity and gear on what's next, but we're extremely excited.

And again this is as I said a wholly owned asset that we'd like to take to the next stage ourselves and given the very small niche indication where it can be developed and given the potential in our regulatory path to get this drug registered, it is really something we can afford from outsource and from the capability viewpoint, both in terms of development and also in terms of commercialization.

In order to talk about the next step from the regulatory viewpoint, I'm going to handover to Pierre, our Chief Medical Officer..

Thank you, Mondher. So, yes, our first objective is clearly to pursue the dose escalation part of study and to activate expansion course. You may remember that the study design that is to the expansion course to accumulate more information of the safety and efficacy profile of the drug.

But perhaps more importantly into your question, we are working hard from the preparation of the next phase or the clinical development plan i.e., pivotal program. We are going to consult with regulatory agencies both in the United States and in Europe.

We are coming to do this in the course of 2017, so that's why by the end of 2017 early 2018, we should have the fundamentals of our pivotal program in place.

To answer specifically your question, yes, we think that some sort of accelerated approval would be possible and this is just excited by the level of productivity that we see in heavy decrease read out in patients, but of course we need to worry there this approach with regulatory agency and that's exactly what we are doing in next few months..

Thank you, and a question regarding lirilumab. This is obviously a program that's run by partner Bristol.

I was just wondering, if there are any discussions with Bristol-Myers Squibb, any updates regarding next steps of lirilumab opportunity or combination program?.

So, again I think this is a key question and I will ask Pierre to chime in at one thing at a time, but as you rightfully said, this asset is fully owned by our partner Bristol-Myers Squibb, we have particular exchange.

We have a joint standing committee where we discuss together the next phase, but they are the decision maker and they are the ones who decide what and when to communicate. It is clear that the signal observe with that safety is of interest for us as well as for our partner, and there is clearly next step to consider.

But I will not disclose this because it's in the hand of BMS to address the right kind of next step in order to validate what we have started. As I said in my introduction, it is likely that we will have an update on the six year result some time as the second half of this year that was communicated already by them.

Now when it comes to next step in terms of development, it's BMS who will communicate this in due time.

Pierre, anything here to add?.

No, I have to say that we are very enthusiastic about this program, and I think that to be a methodical enthusiastic, but as Mondher has said, it's really their responsibility to announce next steps..

And one last question Mondher. So, Innate Pharma has obviously a very deep pipeline in particular with additional or preclinical assets to divest development stages. I was just wondering a big picture what do you expect business development play as a role in the overall strategy going forward for the Company? Thanks..

Thanks a lot. This is a great question and it gives me the opportunity to kind of basically the overall strategy.

So, our kind of strategic still number one is to really become a leader in the field of immunotherapy and continue to broaden our pipeline and bring first and best-in-class agent in the field of immunotherapy, not limiting ourselves to the Innate's immunity. Of course NK is our kind of core business. We're pioneer in this field.

We're happy to see that we have drugs that on the late stage today in clinical phase, I am sorry.

But we're not limited to the Innate immunity, we're rather looking at other potential hallmarks of the immunity cycles and some of the interesting targets are being developed enhanced in collaboration also with academia, and we've a quite strong ties to University here in France, but also we're opening collaboration with academia around the world.

But at the same time, we're also looking at potential targets that we don't have, and the situation where we're today with the cash position that Laure-Hélène mentioned the fact that we've a burn rate that is reasonable for this phase of development, makes us comfortable in terms of business development activity in order to further diversify our portfolio.

At the same time while I'm saying this, we would clearly look at the overall portfolio from strategic viewpoint and decide which assets we'll keep in house and develop ourselves versus the ones for which we'll need to have a partner.

It's clear that with the capability that we're building we'll be in a position to do the Phase I and eventually the proof-of-concept in house and then decide based on the signal that we'll observe whether the asset can be developed by Innate Pharma, the same way we're doing with 4102.

Eventually, if the asset is -- rather drug that can be used in a large set of indication in which case we'll require the capability and outsource and [sub-affair] of last company and then we'll look for partnership.

This is the kind of in and out licensing and of course, yes, we're taking very pragmatic, very opportunistic, but we'll make sure that we'll raise the value and maximize the value for shareholder for different assets that we have in the early stage today..

Thank you, gentlemen. The next question is coming from Mr. RK [ph], HCW. Please go ahead sir..

Hi, this is RK from HCW. Couple of quick questions, one, as the previous caller said, you have a deep pipeline and we know some of the key players, but certainly there're many players out there that you probably are excited about and doing some of the initial work.

Is there one or two of those assets that you could highlight for us Mondher that we should be keeping our eyes out for in the next year or so?.

I must say that its work in progress. What we're doing is as we speak actually we're trying to map the potential candidates in sort of stage of development from the preclinical viewpoint, but also how they would fit in the portfolio.

Because if I'm just acquiring other assets for the sake of having new portfolio, but making sure that we have some sort of strategic fit; and it is very preliminary and I would say it is very early today to disclose any specific name.

But let me give you just one or two examples just to guide you and help you, appreciate the way we are walking and thinking. As we have a CD73 in house coming as the more a search engine, we are not the first of course one in that field. There are other assets that are in the clinic and we believe that this is early and important target.

But in the same time, we were thinking a little bit kind of out of the box and we acquired last year a CD39, which is another great asset and we are basically thinking and working on developing these two compounds in the way that can help differentiate, so we can come with an offer with yes we are not the first-in-class for CD73, but we can bring CD39 in the mix and differentiate our offer versus what the other company had.

So that's one example. And the other example is what we've done with Sanofi and the partnership around bispecific, I mean how many large pharma excited about this new approach, and I think we are very proud of the [indiscernible] sub-affair on the technology that we developed within house for the bispecific.

The collaboration with Sanofi where as they bring the tumoral antigen and we bring the anti-NKG2A in place is one way to diversify our portfolio.

But this would not limit our sales just to know providing the bispecific, if we came across tumor antigen that is of interest to us, we could do this for ourselves, and we could develop a bispecific that is targeted in the specific tumor antigen for our own development.

So, these are the three examples to give you a little bit flavors on how we are approaching this. But since we have Nicolai Wagtmann, our Chief Scientific Officer with us on the call, I'm going to hand over to Nicolai to give you his perspective from the technical viewpoint.

Nicolai?.

Thank you, Mondher. And yes indeed I can only echo what you just said, we are excited about our current preclinical pipeline, and we do expect to continue to see solid progress with that.

But we are of course also continuously looking to import and expand that and expand that, and acquire new early stage projects that we can bring in and take forward, this is what we've been doing.

So in terms of the pipeline as an extent, we had some exciting progress in 2016 and we presented the data and that supports the biology and the rationale for some of the targets and especially monalizumab the anti-NKG2A where we presented data at AACR showing the combination of NKG2A blockade with PD-1 or PD-L1 blockade.

In mouse model really shown strong synergy of the two and then we have continued that and we're going to show a new data again this year at the AACR. So, look out for that it's going to be exciting. And it's an oral presentation by the way this year.

Then, we had some nice progress on the anti-MICA/B as well we started the IND enabling studies, so that is a first-in-class molecule that we're truly excited about.

It recognizes molecules on tumor cells that normally serve as linking for in patients, so they're part of the innate immune system, but they're really tumor antigens that trigger the innate immune system clearly carving the role in how the immune system interacts with tumors, and we've generated first-in-class specific antibody that has a deciding dual mode of action.

And likewise, we had nice progress with the other projects CD39/73 that Mondher mentioned as well as starting to build pipeline of our own building under bispecifics. So, all-in-all, it has been a very nice year.

We've started several new projects, new targets, but they're a little bit too early to talk about yet, and we'll be then looking forward to try to validate and inspect them and then we'll start pursuing those as we go along, but right now we're progressing the projects we know about anti-MICA/B, CD39, CD73, and we'll bring those forward drastically..

Thank you, gentlemen. [Operator Instructions] And we've the questions coming from Mr. Mick Cooper, Trinity Delta. Please go ahead sir..

One quick question to begin with. Could you tell us where the highest values according to the [indiscernible] considerably last year and there is some indication of where it has been made? And then to ask a bit more about your BD strategy, you focused very much on the acquiring asset.

What's the capability? I'm just thinking that IPH4102 isn't that far away from commercialization and whether or not you might look to acquire so forth and to all potential late stage asset, which you could mark in IPH4102?.

Thank you for these two questions. Actually, I'll pick up the second one, so I'm going to answer the second one and then ask you then to maybe ask again your first question. So, when it comes to 4102 maybe I was too quick in explaining the strategy and the overall vision that we've for this molecule.

This is -- let me first of all step back and say that cutaneous T-cell lymphoma is a rare disease, roughly in the United States for example, the incidence is in the range of 1,500, 1,600, 1,700 per year, but the prevalence is higher almost 20,000 patient with cutaneous T-cell lymphoma.

That's coming from the fact that patients with cutaneous T-cell lymphoma tend to live longer than classic lymphoma, and they're exposed to various type of treatments. So, it's a small niche indication when it comes to very advanced form of the disease like the Sézary syndrome. Sézary syndrome in the U.S., we're talking about 300 patients.

So, it's very-very small, but that's the kind of the latest, the late state of the most advanced form of cutaneous T-cell lymphoma. So number two, if we think of this market as a niche indication, you have to also keep in mind that there are only few sites in the U.S.

and few sites in Europe who treat these patients, so it's a very small a target audience from a commercial viewpoint. And last but not least, I mean the model is proven effective in at least in the west with other company who are commercializing molecules for often diseases or rare disease.

It doesn’t require a significant commercial wholesale to a network. As the matter of fact actually for disease like Sésary syndrome given the very limited number of centers in Europe and in the U.S.

who treat this patient, you can build up a very small but very nimble I would say team with maybe 30 to 40 people max, and these are not the classic sales as well, it's essentially medical affairs, medical liaison and few key account managers given again the very specific model we are talking about.

So, that's why we decided to keep this in house, not only we can do it from the clinical development viewpoint as Pierre explain, I mean this is probably one of the disease we're hesitating maybe willing to really help expedite the development for the sake of providing access for patient who do not have from the treatment today.

So, it will not require the large mega phase III program that you need, but also from a commercial viewpoint, it's going to be much easier to you commercialize the drug in cutaneous T-cell lymphoma and in particular in Sésary syndrome other than trying to compete in the lung cancer field for example.

We are there you may need more kind of presence at least from a commercial viewpoint. I hope I addressed your second question, but if you don’t mind can you repeat the first one because I'm not sure I got it..

The first one very simple one, where about have you been hiring people? The headcount increased from 118 to 154, I am just wondering what the epic increase as well?.

Okay, so the question is around the expansion of our headcount and the buildup of capabilities and actually due to the completely transparently, we are not only limiting the expansion through the late stage.

Clearly, we are building up late stage capability that we didn’t have in house of course with physician, the entire account of clinical or research type of resource that you need in order to support the patient program, and we will have more people joining the organization with different type of profile biostatistician people who are doing data management of course more physician, there would be the whole late stage capability from a development viewpoint as well as the commercial.

We introduced some market research and introduced some pricing research et cetera, so we will be building up late stage capabilities.

But we are not limiting to that, actually a significant a part of the increase when to early stage and to the research, and Nicolai's team because again as we are expanding our technology, as we're developing translational medicine unit within our organization, we're expanding as well with more scientists, more technicians and people with knowhow in the field of either translational science or eventually overall in the field of immunotherapy and antibodies..

Thank you, gentlemen. [Operator Instructions] Sir Mahjoubi, there're no further questions for the moment..

So, if there're no further questions, I'm going to close this call. Again, I'd repeat that we're extremely enthusiastic and excited about the progress of our pipeline. I hope we'll have the opportunity during the second half of the year to give you more color and update you on the different clinical data.

You know that you can always reach out to our IR team, if you have specific questions, and if you have desire to get a little bit more details on our pipeline. In waiting to meet some of you at AACR next month, I wish you wonderful day and thank you very much for your contribution to this company. Thank you, bye bye..

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect..