UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission File Number 001-39084
Innate Pharma SA
(Exact name of registrant as specified in its charter and translation of registrant’s name into English)
France
(Jurisdiction of incorporation or organization)
117, Avenue de Luminy
13009 Marseille France
(Address of principal executive offices)
Mondher Mahjoubi, M.D.
Chairman and Chief Executive Officer
Innate Pharma S.A.
117 Avenue de Luminy
13009 Marseille France
Tel: +33 4 30 30 30 30
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
American Depositary Shares, each representing one
ordinary share, nominal value €0.05 per share
Ordinary shares, nominal value €0.05 per share
Trading Symbol
IPHA*
Name of each exchange on which registered
The Nasdaq Global Select Market
The Nasdaq Global Select Market*
*Not for trading, but only in connection with the registration of the American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. Non
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period
covered by the annual report.
Ordinary shares, nominal value €0.05 per share: 78,986,490 as of December 31, 2020
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). B Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an
emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐ Accelerated filter
☒ Emerging growth company
☐
☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b))
by the registered public accounting firm that prepared or issued its audit report. ☐ Yes ☒ No
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards
as issued by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). ☐ Yes ☒ No
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period
covered by the annual report.
TABLE OF CONTENTS
INTRODUCTION....................................................................................................................... 5
PART I......................................................................................................................................... 9
Item 1. Identity of Directors, Senior Management and Advisers................................................ 9
Item 2. Offer Statistics and Expected Timetable......................................................................... 9
Item 3. Key Information.............................................................................................................. 9
9
A. Selected Financial Data..................................................................................................
10
B. Capitalization and Indebtedness.....................................................................................
10
C. Reasons for the Offer and Use of Proceeds....................................................................
10
D. Risk Factors....................................................................................................................
Item 4. Information on the Company........................................................................................... 74
74
A. History and Development of the Company....................................................................
74
B. Business Overview.........................................................................................................
129
C. Organizational Structure.................................................................................................
D. Property, Plants and Equipment......................................................................................
129
Item 4A. Unresolved Staff Comments......................................................................................... 129
Item 5. Operating and Financial Review and Prospects.............................................................. 129
137
A. Operating Results............................................................................................................
152
B. Liquidity and Capital Resources.....................................................................................
157
C. Research and Development............................................................................................
158
D. Trend Information...........................................................................................................
158
E. Off-Balance Sheet Arrangements...................................................................................
158
F. Tabular Disclosure of Contractual Obligations..............................................................
G. Safe Harbor.....................................................................................................................
160
Item 6. Directors, Senior Management and Employee................................................................ 160
160
A. Directors and Senior Management.................................................................................
166
B. Compensation.................................................................................................................
C. Board Practices...............................................................................................................
180
D. Employees............................................................................................................................... 185
E. Share Ownership..................................................................................................................... 185
Item 7. Major Shareholders and Related Party Transactions....................................................... 186
186
A. Major Shareholders.........................................................................................................
188
B. Related Party Transactions.............................................................................................
C.
192
Interests of Experts and Counsel....................................................................................
Item 8. Financial Information...................................................................................................... 192
192
A. Consolidated Statements and Other Financial Information............................................
192
B. Significant Changes........................................................................................................
Item 9. The Offer and Listing...................................................................................................... 192
3
193
A. Offer and Listing Details................................................................................................
193
B. Plan of Distribution.........................................................................................................
193
C. Markets...........................................................................................................................
193
D. Selling Shareholders.......................................................................................................
193
E. Dilution...........................................................................................................................
F. Expenses of the Issue......................................................................................................
193
Item 10. Additional Information.................................................................................................. 193
193
A. Share Capital...................................................................................................................
193
B. Memorandum and Articles of Association.....................................................................
193
C. Material Contracts...........................................................................................................
200
D. Exchange Controls..........................................................................................................
200
E. Taxation..........................................................................................................................
210
F. Dividends and Paying Agents.........................................................................................
210
G. Statement by Experts......................................................................................................
210
H. Documents on Display....................................................................................................
I. Subsidiary Information...................................................................................................
211
Item 11. Quantitative and Qualitative Disclosures About Market Risk...................................... 211
Item 12. Description of Securities Other than Equity Securities................................................. 212
212
A. Debt Securities................................................................................................................
212
B. Warrants and Rights........................................................................................................
212
C. Other Securities...............................................................................................................
D. American Depositary Shares..........................................................................................
212
PART II........................................................................................................................................ 215
Item 13. Defaults, Dividend Arrearages and Delinquencies........................................................ 215
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds........... 215
Item 15. Controls and Procedures................................................................................................ 216
Item 16. Reserved........................................................................................................................ 218
Item 16A. Audit Committees Financial Expert........................................................................... 218
Item 16B. Code of Business Conduct and Ethics........................................................................ 218
Item 16C. Principal Accountant Fees and Services..................................................................... 218
Item 16D. Exemptions from the Listing Standards for Audit Committees................................. 219
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers..................... 219
Item 16F. Change in Registrant’s Certifying Accountant........................................................... 219
Item 16G. Corporate Governance................................................................................................ 219
Item 16H. Mine Safety Disclosure............................................................................................... 220
PART III...................................................................................................................................... 220
Item 17. Financial Statements...................................................................................................... 220
Item 18. Financial Statements...................................................................................................... 221
Item 19. Exhibits.......................................................................................................................... 221
4
INTRODUCTION
Unless otherwise indicated in this annual report (this “Annual Report”), “Innate,” “the company,” “our
company,” “we,” “us” and “our” refer to Innate Pharma S.A. and its consolidated subsidiaries.
“Innate Pharma,” the Innate Pharma logo, Lumoxiti and other trademarks or service marks of Innate
Pharma S.A. appearing in this Annual Report are the property of Innate Pharma S.A. or its subsidiaries.
Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report
are listed without the ® and ™ symbols, but such references should not be construed as any indicator that
their respective owners will not assert, to the fullest extent under applicable law, their right thereto. All
other trademarks, trade names and service marks appearing in this Annual Report are the property of their
respective owners. We do not intend to use or display other companies’ trademarks and trade names to
imply any relationship with, or endorsement or sponsorship of us by, any other companies. LUMOXITI
trademarks will be returned to AstraZeneca further to termination of Lumoxiti License Agreement.
Our audited consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or
IASB. Our consolidated financial statements are presented in euros, and unless otherwise specified, all
monetary amounts are in euros. All references in this Annual Report to “$,” “US$,” “U.S.$,” “U.S.
dollars,” “dollars” and “USD” mean U.S. dollars and all references to “€” and “euros” mean euros, unless
otherwise noted. Throughout this Annual Report, references to ADSs mean American Depositary Shares
or ordinary shares represented by such ADSs, as the case may be.
5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are based on our management’s beliefs and assumptions and on information currently
available to our management. All statements other than present and historical facts and conditions
contained in this Annual Report, including statements regarding our future results of operations and
financial position, business strategy, plans and our objectives for future operations, are forward-looking
statements. When used in this Annual Report, the words “anticipate,” “believe,” “can,” “could,”
“estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,”
“objective,” “should,” or the negative of these and similar expressions identify forward-looking
statements. Forward-looking statements include, but are not limited to, statements about:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the prospects of attaining, maintaining and expanding marketing authorization for
monalizumab, lacutamab and our other product candidates;
the initiation, timing, progress and results of our preclinical studies and clinical trials and those
conducted by third parties, including our collaborators AstraZeneca and Sanofi;
our ability to successfully develop and advance our pipeline of product candidates;
the timing or likelihood of regulatory filings and approvals;
our ability to contract with third-party suppliers and manufacturers and their ability to perform
adequately;
the outcome of the ongoing negotiation with AstraZeneca relating to Innate's decision to return
the rights of Lumoxiti ;
future agreements with third parties in connection with the commercialization of our product
candidates and any other approved product;
our ability to develop sales and marketing capabilities and transition into a commercial-stage
company;
the pricing and reimbursement of our product candidates, if approved;
the effects of increased competition as well as innovations by new and existing competitors in
our industry;
our ability to obtain funding for our operations;
our ability to obtain, maintain, protect and enforce our intellectual property rights and
propriety technologies and to operate our business without infringing the intellectual property
rights and proprietary technology of third parties;
regulatory developments in the United States, Europe and other countries;
costs of compliance and our failure to comply with new and existing governmental regulations
including, but not limited to, tax regulations;
statements regarding future revenue, hiring plans, expenses, capital expenditures, capital
requirements and stock performance;
our expected use of proceeds of the October 2019 global offering;
the impact of COVID-19 on our business, financial condition and results of operations; and
6
•
other risks and uncertainties, including those listed in the section of this Annual Report titled
“Risk Factors.”
You should refer to the section of this Annual Report titled “Item 3.D – Risk Factors” for a discussion of
important factors that may cause our actual results to differ materially from those expressed or implied by
our forward-looking statements. As a result of these factors, we cannot assure you that the forward-
looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking
statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties
in these forward-looking statements, you should not regard these statements as a representation or
warranty by us or any other person that we will achieve our objectives and plans in any specified time
frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by law. The Private Securities
Litigation Reform Act of 1995 and Section 27A of the Securities Act do not protect any forward-looking
statements that we make in connection with this Annual Report.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the
relevant subject. These statements are based upon information available to us as of the date of this Annual
Report, and while we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read to indicate that we have
conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These
statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Annual Report and the documents that we reference in this Annual Report and have
filed as exhibits to this Annual Report completely and with the understanding that our actual future
results, levels of activity, performance and events and circumstances may be materially different from
what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Unless otherwise indicated, information contained in this Annual Report concerning our industry and the
markets in which we operate, including our general expectations and market position, market opportunity
and market size estimates, is based on information from independent industry analysts, third-party sources
and management estimates. Management estimates are derived from publicly available information
released by independent industry analysts and third-party sources, as well as data from our internal
research, and are based on assumptions made by us based on such data and our knowledge of such
industry and market, which we believe to be reasonable. In addition, while we believe the market
opportunity information included in this Annual Report is generally reliable and is based on reasonable
assumptions, such data involve risks and uncertainties and are subject to change based on various factors,
including those discussed under the section of this Annual Report titled “Item 3.D—Risk Factors.”
7
SUMMARY RISK FACTORS
Investing in our shares involves numerous risks, including the risks described in "Item 3.D—Risk
Factors" of this Annual Report on Form 20-F. Below are some of our principal risks, any one of which
could materially adversely affect our business, financial condition, results of operations, and prospects:
• Biopharmaceutical development involves a high degree of uncertainty and most of our product
candidates are in early stages of development.
•
The scientific evidence to support the feasibility of developing product candidates is both
preliminary and limited.
• We intend to develop several of our product candidates in combination with other therapies,
which exposes us to additional risks.
• We are heavily dependent on the success of our current clinical-stage product candidates
• We may not be successful in our efforts to develop additional products that receive regulatory
approval and are successfully commercialized.
• We may encounter substantial delays in our clinical trials, or may be unable to conduct our
clinical trials on the timelines we expect.
• Our product candidates in development may cause undesirable side effects or have other
properties that could halt or delay their clinical development, prevent their regulatory approval,
limit their commercialization or result in other negative consequences.
• We face substantial competition from companies with significantly greater resources and
experience.
•
The regulatory processes that will govern the approval of our product candidates are complex and
changes in regulatory requirements could result in delays or discontinuation of development or
unexpected costs in obtaining regulatory approval.
• Any of our other product candidates, if approved and commercialized, may fail to achieve market
acceptance by physicians, patients, third-party payors or the medical community to a degree that
is necessary for commercial success.
• A fast track, breakthrough therapy or other designation by the FDA may not actually lead to a
faster development or faster regulatory review or approval.
• We have no manufacturing capabilities and rely on third-party manufacturers for our product
candidates.
• We rely on third parties to supply key materials used in our research and development, to provide
services to us and to assist with clinical trials.
• We depend upon our existing collaboration partners, AstraZeneca, Sanofi and other third parties,
and may depend upon future collaboration partners to commit to the research, development,
manufacturing and marketing of our drugs.
•
The late-stage development and marketing of our product candidates may partially depend on our
ability to establish collaborations with major biopharmaceutical companies.
• We have incurred and may in the future incur significant operational losses related to our research
and development activities.
• We may need to raise additional funding to complete the development and any commercialization
of our product candidates, which may not be available on acceptable terms, or at all, and failure to
8
obtain this necessary capital when needed may force us to delay, limit or terminate our product
development efforts or other operations.
•
•
If we do not achieve our product development or commercialization objectives in the timeframes
we expect, we may not receive product revenue or milestone or royalty payments and we may not
be able to conduct our operations as planned.
The revenues generated from our collaboration and license agreements have contributed and are
expected to contribute a large portion of our revenue for the foreseeable future.
• We benefit from tax credits in France that could be reduced or eliminated.
•
The recent global COVID-19 pandemic could adversely affect our business, financial condition
and results of operations.
• Our ability to compete may be adversely affected if we do not adequately obtain, maintain,
protect and enforce our intellectual property or proprietary rights, or if the scope of intellectual
property protection we obtain is not sufficiently broad.
• We benefit from tax credits in France that could be reduced or eliminated.
• Our patents could be found invalid or unenforceable if challenged and we may not be able to
protect our intellectual property.
•
The dual listing of our ordinary shares and the ADSs may adversely affect the liquidity and value
of the ADSs.
• Report titled "Item 3.D—Risks Factors."
PART I
Item 1. Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
A.
Selected Financial Data
Our consolidated audited financial statements have been prepared in accordance with IFRS, as issued by
the IASB. We derived the selected consolidated statement of income (loss) data for the years
ended ,December 31, 2018, 2019 and 2020 and the selected consolidated statement of financial position
data as of December 31, 2018, 2019 and 2020 from our consolidated audited financial statements
included elsewhere in this Annual Report. This data should be read together with, and is qualified in its
entirety by reference to, “Item 5. Operating and Financial Review and Prospects” as well as our financial
statements and notes thereto appearing elsewhere in this Annual Report. Our historical results are not
necessarily indicative of the results to be expected in the future.
Consolidated Statement of Income (Loss) Data:
9
Year ended December 31,
2018
2019(1)
(in thousands of euros, except per share data and
number of ordinary shares)
2020
Revenue and other income
Operating expenses
Research and development expenses
Selling, general and administrative expenses
Impairment of intangible assets
Net income (loss) from distribution agreements
Operating income (loss)
Net financial income (loss)
Income tax expense
Net income (loss)
Net income (loss) per share attributable to equity holders
Basic income (loss) per share (€/share)
Diluted income (loss) per share (€/share)
Number of ordinary shares outstanding used for computing basic net
income (loss) per share
Number of ordinary shares outstanding used for computing diluted
net income (loss) per share
€
93,952 €
85,814 €
70,451
(69,555)
(18,142)
—
(1,109)
5,146
(2,427)
333
3,049
(78,844)
(25,803)
—
(8,219)
(27,052)
6,293
—
(58,613)
(31,246)
(43,529)
861
(62,076)
(1,908)
—
(20,759)
(63,984)
0.05
0.05
(0.31)
(0.31)
(0.81)
(0.81)
58,776,712
66,908,389
78,934,960
58,777,282
66,908,389
78,934,960
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f to our
consolidated financial statements appearing elsewhere in this Annual Report.
Consolidated Statement of Financial Position Data:
As of December 31,
Cash and cash equivalents, short-term investments and non-
current financial assets (2)
Total assets
Total financial debt and defined benefit obligations
Total shareholders’ equity
2018(1)
2019(1)
2020
(in thousands of euros)
€ 202,712
€ 255,869
€ 190,571
451,216
8,219
401,361
22,484
307,423
23,264
€ 167,240
€ 217,416
€ 155,976
(2) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f to our
consolidated financial statements appearing elsewhere in this Annual Report.
(3) Non-current financial assets account for € 35.2, 37.0 and 38.9 million for the years ended December 31, 2018, 2019 and 2020, respectively.
B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
10
D.
Risk Factors
Our business faces significant risks. You should carefully consider all of the information set forth in this
Annual Report and in our other filings with the United States Securities and Exchange Commission, or
the SEC, including the following risk factors which we face and which are faced by our industry. Our
business, financial condition or results of operations could be materially adversely affected by any of
these risks. This report also contains forward-looking statements that involve risks and uncertainties. Our
results could materially differ from those anticipated in these forward-looking statements, as a result of
certain factors including the risks described below and elsewhere in this Annual Report and our other
SEC filings. See “Special Note Regarding Forward-Looking Statements” above.
Risks Related to the Development of our Product Candidates
Biopharmaceutical development involves a high degree of uncertainty and most of our product
candidates are in early stages of development, which makes it difficult to evaluate our current business
and future prospects and may increase the risk of your investment.
We are a biopharmaceutical company with one commercial product, Lumoxiti, which we decided in
December 2020 to return commercial rights to AstraZeneca. We have decided to re-focus investments in
our R&D portfolio consisting of product candidates, some of which we are co-developing, in the early
stages of clinical development and preclinical programs.
A key element of our strategy is to mature and expand our portfolio of proprietary and partnered product
candidates to address unmet medical needs in immuno-oncology. Although our research and development
efforts to date have resulted in a pipeline of product candidates, all of our product candidates require
additional development, regulatory review and approvals, substantial investment, access to sufficient
commercial manufacturing capacity and significant marketing efforts before they can be commercialized
and before we can generate any revenue from product sales or royalties. If we or our collaboration
partners are unable to successfully develop and market these product candidates, our business, prospects,
financial condition and results of operations may be adversely affected.
Aside from our acquisition of Lumoxiti, our operations to date have been limited to developing our
product candidates and undertaking preclinical studies and clinical trials of our product candidates,
including monalizumab and IPH5201, through our partnership with AstraZeneca, lacutamab and
avdoralimab, our most advanced product candidates. The success in development of our current and
future product candidates by us or our collaborators will depend on many factors, including:
•
•
•
•
•
•
obtaining positive results in clinical trials including by demonstrating efficacy, safety and
durability of effect of such product candidates;
completing preclinical studies and receiving regulatory approvals or clearance for conducting
clinical trials for our preclinical programs;
receiving and maintaining approvals for commercialization of such product candidates from
regulatory authorities;
manufacturing or overseeing the manufacturing of our product candidates in acceptable
quantities and at an acceptable cost;
negotiating favorable terms in any collaboration, licensing or other arrangements into which
we may enter, and performing our obligations pursuant to such arrangements;
maintaining, protecting, enforcing and expanding our portfolio of intellectual property rights,
including patents, trade secrets and know-how;
11
•
•
avoiding and defending against third-party interference, infringement or other intellectual
property claims; and
maintaining and growing an organization of scientists, medical professionals, marketing,
distribution and sales personnel and executives who can develop our product candidates and
commercialize any approved products.
In addition, if we are unable to reduce our dependence on our current clinical and preclinical product
candidates, either by in-licensing or acquiring new product candidates, developing our other product
candidates or discovering new product candidates, we may be similarly adversely affected.
The scientific evidence to support the feasibility of developing product candidates is both preliminary
and limited.
Our innovative approach to immuno-oncology aims to activate both the innate and adaptive immune
systems against abnormal or cancerous cells and restore the body’s ability to disrupt their proliferation,
potentially leading to durable responses in patients. This approach is focused on developing checkpoint
inhibitors, tumor-targeting antibodies and antibodies that affect the tumor microenvironment, and several
of our product candidates rely on novel mechanisms of action and on innovative formats for which we
have limited scientific evidence and preclinical and clinical data.
We may not ultimately be able to provide the FDA, European Medicines Agency, or EMA, or other
regulatory authorities with substantial clinical evidence to support a claim of efficacy and durability of
response to enable the applicable regulators to approve our product candidates for any indication. This
may occur because later clinical trials fail to reproduce favorable data obtained in earlier clinical trials,
because the applicable regulator disagrees with how we interpret the data from these clinical trials or
because the applicable regulator does not accept these therapeutic effects as valid endpoints in pivotal
clinical trials that are sufficient to grant marketing approval. Additionally, because product candidates in
later stages of clinical trials may fail to show the desired safety and efficacy traits despite having
progressed through preclinical studies and earlier clinical trials our collaborators in earlier stages of
clinical trials may eventually choose to discontinue later stage trials. For example, following initial
promising results assessing the safety and efficacy of our product candidate lirilumab for the treatment of
various cancer indications, our collaborator decided not to continue development after receiving Phase II
clinical trial data.
In addition to the safety and efficacy traits of any product candidate, clinical trial failures may result from
a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment
criteria. A number of companies in the pharmaceutical industry have suffered significant setbacks in
advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising
results in earlier trials, and it is possible that we will as well. Based upon negative or inconclusive results,
we or our collaborators may decide, or regulators may require us, to conduct additional clinical trials or
preclinical studies. In addition, data obtained from trials and studies are susceptible to varying
interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or
prevent regulatory approval.
We will also need to demonstrate that our product candidates are safe and well tolerated. We do not have
significant data on possible harmful long-term effects of our product candidates and do not expect to have
this data in the near future. As a result, our ability to generate clinical safety and efficacy data sufficient to
support submission of a marketing application or commercialization of our product candidates is
uncertain and is subject to significant risk.
12
We intend to develop several of our product candidates in combination with other therapies, which
exposes us to additional risks.
We are currently developing monalizumab, lacutamab and IPH5201, and may develop other product
candidates, in combination with one or more currently approved cancer therapies. Specifically, with
AstraZeneca, we are currently evaluating monalizumab in an ongoing open-label Phase Ib/II trial in
combination with cetuximab, an epidermal growth factor receptor, or EGFR, inhibitor, and also in a
triplet setting with cetuximab and an anti-PD-L1 immune checkpoint inhibitor and in an ongoing
randomized and double-blind Phase III clinical trial in combination with cetuximab. AstraZeneca is also
currently evaluating monalizumab in ongoing Phase I and II trials in combination with durvalumab.
Lacutamab is also currently evaluated in combination with chemotherapy GEMOX (gemcitabine in
combination with oxaliplatin) in patients with PTCL (Peripheral T Cell Lymphoma). In addition,
IPH5201 is also currently under clinical investigation, in a Phase I trial in combinaton with durvalumab.
Patients may not be able to tolerate our product candidates in combination with other therapies, and
preliminary clinical results indicate that monalizumab, for example, has no meaningful clinical activity as
a monotherapy. Even if any product candidate we develop were to receive marketing approval or be
commercialized for use in combination with other existing therapies, we would continue to be subject to
the risks that the FDA, EMA or other comparable foreign regulatory authorities could revoke approval of
the therapy used in combination with our product candidate or that safety, efficacy, manufacturing or
supply issues could arise with these existing therapies. Combination therapies are commonly used for the
treatment of cancer, and we would be subject to similar risks if we develop any of our product candidates
for use in combination with other therapies or for indications other than cancer. This could result in our
own products, if approved, being removed from the market or being less successful commercially.
We may also evaluate any of our current and future product candidates in combination with one or more
other cancer therapies that have not yet been approved for marketing by the FDA, EMA or comparable
foreign regulatory authorities. We will not be able to market and sell monalizumab, lacutamab or
IPH5201 or any other product candidate we develop in combination with any such unapproved cancer
therapies that do not ultimately obtain marketing approval.
If the FDA, EMA or other comparable foreign regulatory authorities do not approve, revoke their
approval of, or if safety, efficacy, manufacturing or supply issues arise with, the products or product
candidates we choose to evaluate in combination with monalizumab, lacutamab, IPH5201 or any other
product candidate we develop, we may be unable to obtain approval of or market monalizumab,
avdoralimab or any other such product candidate we develop.
We are heavily dependent on the success of our current clinical-stage product candidates and we
cannot be certain that we or our collaborators will be able to obtain regulatory approval for, or
successfully commercialize, these product candidates.
Our business and future success depend on receiving regulatory approval for, and the commercial success
of, our proprietary and partnered product candidates. We have agreements with AstraZeneca with respect
to the advanced development, clinical trial collaboration and potential future registration and marketing of
several of our product candidates, including monalizumab and IPH5201, and with Sanofi for the research
and development of IPH61. Our near-term prospects depend heavily on AstraZeneca’s successful clinical
development and commercialization of monalizumab as well as the successful clinical development of
our other product candidates. The clinical success of these product candidates will depend on a number of
factors, including the ability and willingness of AstraZeneca and our other collaborators to complete
ongoing clinical trials for monalizumab, our ability to complete the clinical trials for which we are
responsible, and the safety, tolerability and efficacy of our product candidates.
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We may not be successful in our efforts to develop additional products that receive regulatory approval
and are successfully commercialized.
The development of a product candidate is a long, costly and uncertain process, aimed at demonstrating
the therapeutic benefit of a product candidate that competes with existing products or those being
developed. There is no guarantee that we or our collaborators will be able to demonstrate a sufficient
degree of clinical efficacy or safety of one or more of our proprietary or licensed product candidates in
order to gain regulatory approval or to become commercially viable. The degree of uncertainty associated
with clinical development and the risks associated with developing new product candidates may make it
difficult to evaluate our current business and our future prospects.
We intend to continue to develop our product candidates that are currently in clinical trials, including
monalizumab, lacutamab, avdoralimab and IPH5201. Monalizumab is currently being investigated in
multiple Phase I, Phase II and Phase III clinical trials under a co-development agreement with
AstraZeneca. Lacutamab is currently being investigated in an open-label, multi-cohort Phase II clinical
trial in CTCL and in Phases I and II in PTCL. Avdoralimab is currently being evaluated in Phase I and
Phase II clinical trials. IPH5201 is currently being investigated in an open-label Phase I clinical trial
sponsored by AstraZeneca. While we believe that we will eventually have the in-house capabilities to
complete the development of monalizumab, lacutamab, avdoralimab and IPH5201, we have not yet
completed the clinical trials for these or other product candidates, and there can be no assurance that these
or other product candidates will gain regulatory approval or become commercially viable.
Delays in the preclinical development of a product candidate could lead to delays in initiating its clinical
development. A failure in the preclinical development of a product candidate could lead to abandoning its
development. Further delays or failures at the various clinical stages for a given indication could result in
delay or halt the development of the product candidate in such indication or in other indications.
Moreover, disappointing results during the initial phases of development are often not a sufficient basis
for deciding whether or not to continue a project. At these early stages, sample sizes, the duration of
studies and the parameters examined may not be sufficient to enable a definitive conclusion to be drawn,
in which case further investigations are required. Conversely, promising results during the initial phases,
and even after advanced clinical trials have been conducted, do not guarantee that a product candidate or
an approved drug will be successfully approved and commercialized.
The risks related to the failure of a product candidate’s development are highly related to the stage of
maturity of the product candidate. Given the relatively early stage of the product candidates in our
pipeline, there is a substantial risk that some or all of our product candidates will not obtain regulatory
approval or be commercialized, which would have an adverse impact on our business, prospects, financial
condition and results of operations.
We may not be successful in our efforts to identify, discover or develop additional product candidates.
We are seeking to develop a broad and innovative pipeline of product candidates in addition to
monalizumab, lacutamab, avdoralimab and IPH5201. We may not be successful in identifying additional
product candidates for clinical development for a number of reasons. For example, our research
methodology may be unsuccessful in identifying potential product candidates or the potential product
candidates we identify may have harmful side effects, lack of efficacy or other characteristics that make
them unmarketable or unlikely to receive regulatory approval.
Research programs to pursue the development of our product candidates for additional indications and to
identify new product candidates and disease targets require substantial technical, financial and human
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resources. Our research programs may initially show promise in identifying potential indications or
product candidates, yet fail to yield results for clinical development for a number of reasons, including:
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the research methodology used may not be successful in identifying potential indications or
product candidates;
potential product candidates may, after further study, be shown to have harmful adverse
effects or other characteristics that indicate they are unlikely to be effective drugs; or
it may take greater human and financial resources to identify additional therapeutic
opportunities for our product candidates or to develop suitable potential product candidates
through internal research programs than we will possess, thereby limiting our ability to
diversify and expand our product portfolio.
Accordingly, there can be no assurance that we will ever be able to identify additional indications for our
product candidates or to identify and develop new product candidates through internal research programs.
We may focus our efforts and resources on potential product candidates or other potential programs that
ultimately prove to be unsuccessful.
We may encounter substantial delays in our clinical trials, or may be unable to conduct our clinical
trials on the timelines we expect.
Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any
clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more
clinical trials can occur at any stage of testing, and our future clinical studies may not be successful.
Events that may prevent successful or timely completion of clinical development include:
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inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to
support the initiation of clinical trials;
delays or failure in reaching a consensus with regulatory agencies on clinical trial design;
delays in reaching agreement on acceptable terms with prospective CROs and investigational
sites, the terms of which can be subject to extensive negotiation and may vary significantly
among different CROs and investigational sites;
imposition of a temporary or permanent clinical hold by regulatory agencies, including as a
result of a new safety finding that presents unreasonable risk to clinical trial participants, a
negative finding from an inspection of our clinical trial operations or investigational sites,
developments in trials conducted by competitors for related technology that raise regulators’
concerns about risk to patients of the technology broadly or if a regulatory body finds that the
investigational protocol or plan is clearly deficient to meet its stated objectives. For example,
in November 2019, our TELLOMAK trial was put on full or partial holds in a number of
countries. We were authorized to fully resume patient enrollment and treatment after having
been able to produce a new conform batch;
delays in recruiting suitable patients to participate in our clinical trials;
difficulty collaborating with patient groups and investigators;
failure by us, our CROs or other third parties, including our collaborators, to adhere to clinical
trial requirements;
delays in having patients complete participation in a clinical trial or return for post-treatment
follow-up;
patients withdrawing from a clinical trial;
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occurrence of adverse events associated with a product candidate that are viewed to outweigh
its potential benefits;
changes in regulatory requirements and guidance that require amending or submitting new
clinical trial protocols;
regulatory feedback requiring us to amend the protocols of ongoing clinical trials in response
to safety considerations, as we have previously been required to;
changes in the standard of care on which a clinical development plan was based, which may
require new or additional clinical trials;
the cost of clinical trials of our product candidates being greater than we anticipate;
clinical trials of our product candidates producing negative or inconclusive results, which may
result in our deciding, or regulators requiring us, to conduct additional clinical trials or
abandon product development programs;
transfer of manufacturing processes to larger-scale facilities operated by either a contract
manufacturing organization, or CMO, or by us, and delays or failure by our CMOs or us to
make any necessary changes to such manufacturing process; and
batch recalls, recalls of manufactured product candidates or delays in manufacturing, testing,
releasing, validating, or importing or exporting sufficient stable quantities of our product
candidates for use in clinical trials or the inability to do any of the foregoing.
Any inability to successfully complete preclinical and clinical development could result in additional
costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation
changes to our product candidates, we may be required to or we may elect to conduct additional studies to
bridge our modified product candidates to earlier versions. Clinical study delays could also shorten any
periods during which our products have patent protection and may allow our competitors to bring
products to market before we do, which could impair our ability to successfully commercialize our
product candidates and may harm our business and results of operations.
We depend on enrollment of patients in our clinical trials for our product candidates.
Successful and timely completion of clinical trials will require that we or our subcontractors enroll a
sufficient number of suitable patients. Clinical trials may be subject to delays as a result of patient
enrollment taking longer than anticipated or patient withdrawal. Patient enrollment depends on many
factors, including the size and nature of the patient population, which is typically limited for rare or
orphan diseases making the enrollment more difficult, eligibility criteria for the trial, the proximity of
patients to clinical sites, the design of the clinical protocol, the availability of competing clinical trials, the
availability of new drugs approved for the indication the clinical trial is investigating, and clinicians’ and
patients’ perceptions as to the potential advantages of the drug being studied in relation to other available
therapies. For example, we are developing lacutamab for the treatment of cutaneous T-cell lymphoma, or
CTCL. CTCL is an orphan disease, which means that the potential patient population is limited. In
addition, there are several other product candidates potentially in development for the indications for
which we are developing product candidates, and we may compete for patients with the sponsors of trials
for those drugs. These factors may make it difficult for us to enroll enough patients to complete our
clinical trials in a timely and cost-effective manner. Delays in the completion of any clinical trial of any of
our product candidates will increase our costs, slow down our product candidate development and
approval process and delay or potentially jeopardize our ability to commence product sales and generate
revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or
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completion of clinical trials may also ultimately lead to the inability to obtain regulatory approval of our
product candidates.
Our product candidates in development may cause undesirable side effects or have other properties
that could halt or delay their clinical development, prevent their regulatory approval, limit their
commercialization or result in other negative consequences.
Use of our product candidates in development could be associated with side effects or adverse events
which can vary in severity and in frequency. Undesirable side effects or unacceptable toxicities caused by
our products or product candidates could cause us or regulatory authorities to interrupt, delay, or halt
clinical trials. The FDA or European regulatory authorities could delay or deny approval of our product
candidates for any or all targeted indications and negative side effects could result in a more restrictive
label for any drug that is approved. Side effects such as toxicity or other safety issues associated with the
use of our product candidates could also require us or our collaborators to perform additional studies or
halt development of product candidates or sale of approved products.
Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to
complete the trial, or could result in potential product liability claims. In addition, these side effects may
not be appropriately or timely recognized or managed by the treating medical staff, as toxicities resulting
from immunotherapy are not normally encountered in the general patient population and by medical
personnel. Inadequate training in recognizing or managing the potential side effects of our product
candidates could result in adverse effects to patients, including death. Any of these occurrences may have
an adverse impact on our business, prospects, financial condition and results of operations.
We face substantial competition from companies with significantly greater resources and experience.
The biotechnology and pharmaceutical market, and notably the immuno-oncology field, is characterized
by rapidly advancing technologies, products protected by intellectual property rights and intense
competition and is subject to significant and rapid change as researchers learn more about diseases and
develop new technologies and treatments. We face potential competition from many different sources,
including major pharmaceutical companies, specialty pharmaceutical and biotechnology companies,
academic institutions and governmental agencies and public and private research institutions. Any
product candidates that we or our collaborators successfully develop will compete with existing therapies
and new therapies that may become available in the future. If competing products are marketed before
ours, or at lower prices, or cover a wider therapeutic spectrum, or if they prove to be more effective or
better tolerated, our business, prospects, financial condition and results of operations could be affected.
Many of our competitors who are developing immuno-oncology and anti-cancer therapies have
considerably greater resources and experience in research, access to patients for clinical trials, drug
development, finance, manufacturing, marketing, technology and personnel than we do. In particular,
large pharmaceutical companies have substantially more experience than we do in conducting clinical
trials and obtaining regulatory authorizations. Mergers and acquisitions in the pharmaceutical,
biotechnology and diagnostic industries may result in even more resources being concentrated among a
smaller number of our competitors. Smaller or early-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and established companies. These
competitors are also likely to compete with us to recruit and retain scientific and management personnel,
acquire rights for promising product candidates and other complementary technologies, establish clinical
trial sites and patient registration for clinical trials and acquire technologies complementary to, or
necessary for, our programs, as well as to enter into collaborations with partners who have access to
innovative technologies. If we cannot successfully compete with new or existing products, our marketing
and sales will suffer and we may never be profitable. Should any of these risks materialize, our business,
prospects, financial condition and results of operations may be adversely affected.
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We cannot guarantee that our product candidates will:
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obtain regulatory authorizations or become commercially available before those of our
competitors;
remain competitive in the face of other products developed by our competitors, which may
prove to be safer, are more effective, have fewer or less severe side effects, are more
convenient, have a broader label, have more robust intellectual property protection or are less
expensive;
remain competitive in the face of products of competitors that are more efficient in their
manufacturing or more effective in their marketing; and
not become obsolete or unprofitable due to technological progress or other therapies developed
by our competitors.
In addition, while any future product candidate that is approved may compete with many existing drugs or
other therapies, to the extent it is solely used in combination with these therapies, our product candidates
will not be competitive with such therapies but any sales of such products could be limited to sales of the
combination therapy. In this case, we would be exposed to the same competitive risks as the product used
in combination with our product, such as a product that is marketed before the combination therapy, has
lower prices, covers a wider therapeutic spectrum or proves to be more effective or better tolerated. For
additional information regarding competition to our business see “Business—Competition.”
Risks Related to Regulatory Approval and Marketing of Our Product Candidates and Legal
Compliance Matters
Even if we complete the necessary preclinical studies and clinical trials, the marketing approval
process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for
the commercialization of some or all of our product candidates. If we are not able to obtain, or if there
are delays in obtaining, required regulatory approvals, in particular in the United States or the
European Union, we will not be able to commercialize our product candidates, and our ability to
generate revenue will be materially impaired.
The research and development of pharmaceutical products is governed by complex regulatory
requirements. The regulatory agencies that oversee these requirements have the authority to permit the
commencement of clinical trials or to temporarily or permanently halt a study. They are entitled to request
additional clinical data before authorizing the commencement or resumption of a study, which could
result in delays or changes to our product development plan. As we advance our product candidates, we
will be required to consult with these regulatory agencies and comply with all applicable guidelines, rules
and regulations. If we fail to do so, we may be required to delay or discontinue development of our
product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval
necessary to bring a potential product to market could decrease our ability to generate sufficient product
revenue to maintain our business.
The clinical trials of our product candidates are, and the manufacturing and marketing of our one
approved product, Lumoxiti, and our other product candidates will be, subject to regulation by numerous
government authorities in the United States, in the European Union and in other countries where we
intend to test and, if approved, market any product candidate. Before obtaining regulatory approvals for
the commercial sale of any product candidate, we must demonstrate, with substantial evidence gathered in
well-controlled clinical trials, and, with respect to approval in the United States, to the satisfaction of the
FDA, with respect to approval in the European Union, to the satisfaction of the EMA or, with respect to
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approval in other countries, similar regulatory authorities in those countries, that the product candidate is
safe and effective for use in each target indication.
When we acquired Lumoxiti, AstraZeneca had already obtained marketing approval from the FDA and
they also filed the Marketing Authorization in European Union. We have never submitted a product
candidate for marketing approval in the United States, in European Union or elsewhere.
In the United States, we expect that the requisite regulatory submission to seek marketing authorization
for our product candidates will be a Biologic License Application, or BLA, and the competent regulatory
authority is the FDA. In the European Union, the requisite approval is a Marketing Authorization, or MA,
which for products developed by the means of antibody-based therapeutics, gene or cell therapy products
as well as tissue engineered products, is issued through a centralized procedure involving the EMA (see
“Business—Regulation”). Satisfaction of these and other regulatory requirements is costly, time
consuming, uncertain and subject to unanticipated delays. Failure to comply with the applicable
requirements at any time during the product development process, approval process or after approval,
may subject an applicant to administrative or judicial sanctions. These sanctions could include, for
example, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold,
untitled or warning letters, product recalls or withdrawals from the market, product seizures, total or
partial suspension of production or distribution injunctions, fines, refusals of government contracts,
restitution, disgorgement, or civil or criminal penalties.
Data from preclinical and clinical studies are likely to give rise to different interpretations, which could
delay regulatory authorization, restrict the scope of any such authorization or force us to repeat trials in
order to meet the requirements of the various regulators. Regulatory requirements and processes vary
widely among countries, and we may be unable to obtain authorization within each relevant country in a
timely manner. Regulatory authorities may prevent us from starting clinical trials or continuing clinical
development if the data were not produced according to applicable regulations or if they consider that the
balance between the expected benefits of the product and its possible risks is not sufficient to justify the
trial.
Despite our efforts, our product candidates may not:
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offer improvement over existing, comparable products;
be proven safe and effective in clinical trials; or
meet applicable regulatory standards.
This process can take many years and may include post-marketing studies and surveillance, which will
require the expenditure of substantial resources beyond our existing cash on hand. Of the large number of
drugs in development globally, only a small percentage successfully complete the regulatory approval
process and not all approved drugs are successfully commercialized. Delay or failure to obtain, or
unexpected costs in obtaining, the regulatory approval necessary for us or our partners to bring a potential
product candidate to market could have a material adverse effect on our business, prospects, financial
condition and results of operations.
The regulatory processes that will govern the approval of our product candidates are complex and
changes in regulatory requirements could result in delays or discontinuation of development or
unexpected costs in obtaining regulatory approval.
Our product candidates are based on new technologies that are constantly evolving and have not been
extensively tested on humans. The applicable regulatory requirements vary between jurisdictions and are
also complex, potentially difficult to apply and subject to significant modifications. Modifications to
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regulations during the course of clinical development and regulatory review may lead to delays or the
refusal of authorization.
In Europe, the United States and other countries, regulations can potentially:
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significantly delay or increase the cost of development, testing, manufacturing and marketing
of our products;
limit the indications for which we will be authorized to market our products; and
impose new, more stringent, requirements, suspend marketing authorizations, or request the
suspension of clinical trials or the marketing of our products if unexpected results are obtained
during trials performed by other researchers on products similar to our products.
Marketing authorization in one jurisdiction does not ensure marketing authorization in another, but a
failure or delay in obtaining marketing authorization in one jurisdiction may have a negative effect on the
regulatory process in others. Failure to obtain marketing authorization in other countries or any delay or
setback in obtaining such approval would impair our ability to develop additional markets for our product
candidates. This would reduce our target market and limit the full commercial potential of our product or
product candidates. Should any of these risks materialize, this could harm our business.
Our failure to obtain marketing approval in jurisdictions other than the United States and Europe
would prevent our product candidates from being marketed in these other jurisdictions, and any
approval we are granted for our product candidates in the United States and Europe would not assure
approval of product candidates in other jurisdictions.
In order to market and sell our other product candidates in jurisdictions other than the United States and
Europe, we must obtain separate marketing approvals and comply with numerous and varying regulatory
requirements. The approval process varies among countries and can involve additional testing. The time
required to obtain approval may differ from that required to obtain FDA approval or approvals from
regulatory authorities in the European Union. The regulatory approval process outside the United States
and Europe generally includes all of the risks associated with obtaining FDA approval or approvals from
regulatory authorities in the European Union. In addition, some countries outside the United States and
Europe require approval of the sales price of a product before it can be marketed. In many countries,
separate procedures must be followed to obtain reimbursement and a product may not be approved for
sale in the country until it is also approved for reimbursement. We may not obtain marketing, pricing or
reimbursement approvals outside the United States and Europe on a timely basis, if at all. Approval by the
FDA or regulatory authorities in the European Union does not ensure approval by regulatory authorities
in other countries or jurisdictions, and approval by one regulatory authority outside the United States and
Europe does not ensure approval by regulatory authorities in other countries or jurisdictions or by the
FDA or regulatory authorities in the European Union. We may not be able to file for marketing approvals
and may not receive necessary approvals to commercialize our products in any market. Marketing
approvals in countries outside the United States and Europe do not ensure pricing approvals in those
countries or in any other countries, and marketing approvals and pricing approvals do not ensure that
reimbursement will be obtained.
Side effects that appear following the launch of a drug on the market may result in the product being
taken off the market or additional warnings being added to the label despite having obtained all
regulatory approvals.
A drug’s launch in the market may expose a large number of patients to potential risks associated with the
treatment with a new pharmaceutical product. Certain side effects, which may not have been identified
during clinical trials, can subsequently appear. For these reasons, regulatory agencies require companies
to implement post-approval monitoring. Depending on the occurrence of serious undesirable effects, the
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agencies may require that we or a collaboration partner of ours take a drug off the market temporarily or
permanently, even if it is effective and has obtained all the necessary marketing authorizations. Such an
action would negatively impair our ability to generate revenue from such product and could more
generally negatively affect our ability to develop, obtain regulatory approval for, and commercialize our
other product candidates and our reputation generally, each of which could have a material adverse effect
on our business and results of operations. In addition, if the product candidates we develop receive
marketing authorization and we or others identify undesirable side effects caused by any product after the
approval, a number of potentially significant negative consequences could result, including that regulatory
authorities may require the addition of labeling statements, such as a “boxed” warning or a
contraindication, we may be required to create a medication guide outlining the risks of such side effects
for distribution to patients and our reputation may suffer.
Lumoxiti and any other product candidate for which we obtain marketing approval will be subject to
strict enforcement of post-marketing requirements and we could be subject to substantial penalties,
including withdrawal of our product from the market, if we fail to comply with all regulatory
requirements or if we experience unanticipated problems with our product and product candidates,
when and if any of them are approved.
Lumoxiti and any product candidate for which we obtain marketing approval, will be subject to continual
requirements of and review by the FDA, EMA and other regulatory authorities, including requirements
relating to manufacturing processes, post-approval clinical data, labeling, advertising and promotional
activities for such product. These requirements include, but are not limited to, restrictions governing
promotion of an approved product, submissions of safety and other post-marketing information and
reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality
control, quality assurance and corresponding maintenance of records and documents, and requirements
regarding the distribution of samples to physicians and recordkeeping. In addition, even if marketing
approval of a product candidate is granted, the approval may be subject to limitations on the indicated
uses for which the product may be marketed, restrictions for specified age groups, warnings, precautions
or contraindications or to the conditions of approval.
As we remain BLA holder for Lumoxiti until the end of the transition period, we still have to comply with
the post-marketing requirements.
The FDA and other federal and state agencies, including the U.S. Department of Justice, or DOJ, closely
regulate compliance with all requirements governing prescription products, including requirements
pertaining to marketing and promotion of products in accordance with the provisions of the approved
labeling and manufacturing of products in accordance with cGMP requirements. The FDA and DOJ
impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not
market our products for their approved indications, we may be subject to enforcement action for off-label
marketing. Prescription products may be promoted only for the approved indications and in accordance
with the provisions of the approved label. However, companies may also share truthful and not
misleading information that is otherwise consistent with the labeling. Violations of such requirements
may lead to investigations alleging violations of the Food, Drug and Cosmetic Act and other statutes,
including the False Claims Act and other federal and state health care fraud and abuse laws as well as
state consumer protection laws. Our failure to comply with all regulatory requirements, and later
discovery of previously unknown adverse events or other problems with our products, manufacturers or
manufacturing processes, may yield various results, including:
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litigation involving patients taking our products;
restrictions on such products, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a product;
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restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
warning letters or untitled letters;
withdrawal of the products from the market;
refusal to approve pending applications or supplements to approved applications that we
submit;
recall of products;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
damage to relationships with any potential collaborators;
unfavorable press coverage and damage to our reputation;
refusal to permit the import or export of our products;
product seizure; or
injunctions or the imposition of civil or criminal penalties.
Non-compliance by us or any future collaborator with the FDA, EMA or other regulatory requirements
regarding safety monitoring or pharmacovigilance, and with requirements related to the development of
products for the pediatric population, can also result in significant financial penalties. Similarly, failure to
comply with regulatory requirements regarding the protection of personal information can also lead to
significant penalties and sanctions.
Coverage and reimbursement may be limited or unavailable in certain market segments for our
product candidates, if approved, which could make it difficult for us to sell our product candidates
profitably.
Successful sales of our product candidates, if approved, will depend, in part, on the availability of
adequate coverage and reimbursement from government authorities and third-party payors, such as
private health insurers and health maintenance organizations. Patients who are provided medical
treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs
associated with their treatment. Adequate coverage and reimbursement from governmental healthcare
programs, such as Medicare and Medicaid in the United States or the Social Security in France, and
commercial payors are critical to new product acceptance.
Government authorities and third-party payors, such as private health insurers and health maintenance
organizations, decide which drugs and treatments they will cover and the amount of reimbursement.
Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the
third-party payor’s determination that use of a product is:
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a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
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Policies for coverage and reimbursement for products vary among third-party payors. No uniform policy
of coverage and reimbursement for products exists among third-party payors, and third-party payors are
increasingly challenging the price, examining the medical necessity, and reviewing the cost-effectiveness
of approved drugs and medical services, in addition to questioning their safety and efficacy. As a result,
obtaining coverage and reimbursement approval of a product from a government or other third-party
payor is a time-consuming and costly process that could require us or our partners to provide to each
payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-
payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Coverage
decisions may depend upon clinical and economic standards that disfavor new drug products when more
established or lower cost therapeutic alternatives are already available or subsequently become available.
Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be
adequate for us to achieve or sustain profitability or may require co-payments that patients find
unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement
for, long-term follow-up evaluations required following the use of our product candidates or approved
products.
Because our product candidates represent new approaches to the treatment of cancer and accordingly,
may have a higher cost than conventional therapies and may require long-term follow-up evaluations, the
risk that coverage and reimbursement rates may be inadequate for us to achieve profitability may be
elevated. There are currently a limited number of immunotherapy products that are designed to treat
cancer on the market and, accordingly, there is less experience or precedent for the reimbursement of such
treatments by governmental entities or third-party payors.
Government restrictions on pricing and reimbursement and other healthcare cost-containment
initiatives may negatively affect our ability to generate revenues for our product candidates for which
we obtain regulatory approval.
Government authorities and other third-party payors are developing increasingly sophisticated methods of
controlling healthcare costs, including by limiting coverage and the amount of reimbursement for
particular medications. Increasingly, third-party payors are requiring that pharmaceutical and
biotechnology companies provide them with predetermined discounts from list prices as a condition of
coverage, are using restrictive formularies and preferred drug lists to leverage greater discounts in
competitive classes and are challenging the prices charged for medical products.
In the United States, the European Union and other foreign jurisdictions, there have been a number of
legislative and regulatory changes to the healthcare system that could affect our or our partners’ ability to
sell our products profitably. By way of example, in the United States, the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, which we
collectively refer to as the ACA, was enacted in March 2010 and is having a significant impact on the
provision of, and payment for, healthcare in the United States. The ACA was intended to broaden access
to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against
fraud and abuse, add new transparency requirements for the healthcare and health insurance industries,
impose new taxes and fees on the health industry and impose additional health policy reforms.
Among the provisions of the ACA of importance to our product candidates are:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded
prescription drugs and biologic agents, apportioned among these entities according to their
market share in certain government healthcare programs;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid
Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and
generic drugs, respectively;
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a new Medicare Part D coverage gap discount program, in which manufacturers must now
agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to
eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s
outpatient drugs to be covered under Medicare Part D;
extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to
individuals who are enrolled in Medicaid managed care organizations;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states
to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility
categories for certain individuals with income at or below 133% of the federal poverty level,
thereby potentially increasing a manufacturer’s Medicaid rebate liability;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical
pricing program; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and
conduct comparative clinical effectiveness research, along with funding for such research.
There have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent
efforts by the Trump administration to repeal and replace certain aspects of the ACA, and we expect such
challenges to continue. Since January 2017, President Trump has signed two executive orders designed to
delay the implementation of certain provisions of the ACA or otherwise circumvent some of the
requirements for health insurance mandated by the ACA. Concurrently, Congress has considered
legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed
comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA
have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision that repealed,
effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain
individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly
referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently
eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-
sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the
health insurer tax. In July and December 2018, Centers for Medicare & Medicaid Services, or CMS,
within the United States Department of Health and Human Services, published final rules with respect to
permitting further collections and payments to and from certain ACA qualified health plans and health
insurance issuers under its risk adjustment program in response to the outcome of federal district court
litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a
Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the
“individual mandate” was repealed by the U.S. Congress as part of the Tax Cuts and Jobs Act of 2017
Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the Texas
U.S. District Court ruling and remanded the case back to the District Court to determine whether the
remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently reviewing this
case, although it is uncertain when a decision will be made. Although the U.S. Supreme Court has yet
ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order
to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of
obtaining health insurance coverage through the ACA marketplace. The executive order also instructs
certain governmental agencies to review and reconsider their existing policies and rules that limit access
to healthcare, including among others, reexamining Medicaid demonstration projects and waiver
programs that include work requirements, and policies that create unnecessary barriers to obtaining access
to health insurance coverage through Medicaid or the ACA. It is unclear how the Supreme Court ruling,
other such litigation, and the healthcare reform measures of the Biden administration will impact ACA.
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In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These
changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which
went into effect in April 2013 and will remain in effect through 2030 unless additional Congressional
action is taken. Both the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012, or
ATRA, further reduced Medicare payments to several providers and the ATRA increased the statute of
limitations period for the government to recover overpayments to providers from three to five years.
Additional legislative proposals to reform healthcare and government insurance programs, along with the
trend toward managed healthcare in the United States, could influence the purchase of medicines and
reduce demand and prices for our product candidates, if approved. This could harm our or our partners’
ability to market any drugs and generate revenues. Cost containment measures that healthcare payors and
providers are instituting and the effect of further healthcare reform could significantly reduce potential
revenues from the sale of any of our product candidates approved in the future, and could cause an
increase in our compliance, manufacturing, or other operating expenses.
In addition, in the United States, federal programs impose penalties on drug manufacturers in the form of
mandatory additional rebates and/or discounts if commercial prices increase at a rate greater than the U.S.
Bureau of Labor Statistics consumer price index, and these rebates or discounts, which can be substantial,
may affect our ability to raise commercial prices.
Further, there has been increasing legislative and enforcement interest in the United States with respect to
drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and
proposed and enacted federal and state legislation designed to, among other things, bring more
transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies
for drugs. At the federal level, the Trump administration’s budget proposal for fiscal years 2020 contains
further drug price control measures that could be enacted during the budget process or in other future
legislation. The Trump administration also released a “Blueprint”, or plan, to lower drug prices and
reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer
competition, increase the negotiating power of certain federal healthcare programs, incentivize
manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products
paid by consumers. On July 24, 2020 and September 13, 2020, the Trump administration announced
several executive orders related to prescription drug pricing that seek to implement several of the
administration’s proposals. As a result, the FDA released a final rule on September 24, 2020, effective
November 30, 2020, providing guidance for states to build and submit importation plans for drugs from
Canada. Further, on November 20, 2020, the Department of Health and Human Services finalized a
regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to
plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price
reduction is required by law. The implementation of the rule has been delayed by the Biden
administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also
creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for
certain fixed fee arrangements between pharmacy benefit managers and manufacturers , the
implementation of which have also been delayed pending review by the Biden administration until March
22, 2021. On November 20, 2020, CMS issued an interim final rule implementing President Trump’s
Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-
administered drugs to the lowest price paid in other economically advanced countries, effective January 1,
2021. On December 28, 2020, the U.S. District Court in Northern California issued a nationwide
preliminary injunction against implementation of the interim final rule. The likelihood of implementation
of any of the other Trump administration reform initiatives is uncertain as it is unclear whether the Biden
administration will work to reverse these measures or pursue similar policy initiatives. At the state level,
legislatures have increasingly passed legislation and implemented regulations designed to control
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pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures,
and, in some cases, designed to encourage importation from other countries and bulk purchasing.
In some countries, the proposed pricing for a biopharmaceutical product must be approved before it may
be lawfully marketed. In addition, in certain foreign markets, the pricing of biopharmaceutical product is
subject to government control and reimbursement may in some cases be unavailable. The requirements
governing drug pricing vary widely from country to country. For example, the European Union provides
options for its member states to restrict the range of medicinal products for which their national health
insurance systems provide reimbursement and to control the prices of medicinal products for human use.
An EU member state may approve a specific price for the medicinal product, it may refuse to reimburse a
product at the price set by the manufacturer or it may instead adopt a system of direct or indirect controls
on the profitability of the company placing the medicinal product on the market. There can be no
assurance that any country that has price controls or reimbursement limitations for biopharmaceutical
products will allow favorable reimbursement and pricing arrangements for any of our products.
Historically, biopharmaceutical products launched in the European Union do not follow price structures
of the United States and generally tend to have significantly lower prices.
We believe that pricing pressures will continue and may increase, which may make it difficult for us to
sell Lumoxiti or any of our product candidates that may be approved in the future at a price acceptable to
us or any of our existing or future collaborators.
Any of our other product candidates, if approved and commercialized, may fail to achieve market
acceptance by physicians, patients, third-party payors or the medical community to a degree that is
necessary for commercial success.
Even if the medical community accepts a product as safe and efficacious for its indicated use, physicians
may choose to restrict the use of the product if we are unable to demonstrate that, based on experience,
clinical data, side-effect profiles and other factors, our drug is preferable to any existing drugs or
treatments. We cannot predict the degree of market acceptance of Lumoxiti or any product candidate that
receives marketing authorization, which will depend on a number of factors, including, but not limited to:
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the demonstration of the clinical efficacy and safety of the drug;
the approved labeling for the drug and any required warnings;
prevalence and severity of adverse side effects;
the advantages and disadvantages of the drug compared to alternative treatments;
ease of the drug’s use;
our ability to educate the medical community about the safety and effectiveness of the drug;
the scope of any approval provided by the FDA or foreign regulatory authorities;
publicity about our product or about competitive products;
the coverage and reimbursement policies of government and commercial third-party payors
pertaining to the drug;
the market price of our drugs relative to competing treatments; and
due to the rarity of orphan diseases, it could be difficult finding patients seeking treatment.
Poor market penetration could have an adverse effect on our business, prospects, financial condition and
results of operations.
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Our commercial experience is currently limited to Lumoxiti. Although Lumoxiti received a Marketing
Authorization in 2018 in the US, the level of sales in 2020 was lower than expected, leading us to make
the decision in December 2020 to return the commercial rights of Lumoxiti to AstraZeneca. Beyond the
financial impacts, the direct consequence of this decision was the immediate reduction of commercial
operations in our US affiliate. We have already identified some of the causes, including more complex
patient access than expected due to geographic dispersion. The global pandemic of COVID-19 also
contributed to this outcome, as a result of significantly limited interactions with prescribing physicians
and the indolent and non-fatal nature of hairy cell leukemia in the short term, which encouraged
physicians to delay or cancel treatment for some patients. A retrospective analysis of our commercial
experience is underway to identify all contributing factors and capitalize on this experience for future
registration and commercialization of our drug candidates.
Of note, risk factors related to the return of commercialization roghts to AstraZeneca are detailed in the -
Risks related to the return of Lumoxiti commercialization rights to AstraZeneca - section.
Even if some of our other product candidates receive marketing authorization, the terms of such
approval, ongoing regulation and potential post-marketing restrictions or withdrawal from the market
may limit how the drug may be marketed and may subject us to penalties for failure to comply with
regulatory requirements, which could impair our ability to generate revenues.
Even if any of our other product candidates receives marketing authorization, such approval may carry
conditions that limit the market for the drug or put the drug at a competitive disadvantage relative to
alternative therapies. Regulators may limit the marketing of products to particular indications or patient
populations. Regulators may require warning labels and drugs with warnings are subject to more
restrictive marketing regulations than drugs without such warnings. These restrictions could make it more
difficult to market any drug effectively. Marketing restrictions may reduce the revenue that we are able to
obtain.
Any of our product candidates for which we obtain marketing authorization, and the manufacturing
processes, post-approval studies and measures, labeling, advertising and promotional activities for such
products, among other things, will be subject to continual requirements of and review by the FDA, EMA
and other regulatory authorities. These requirements include submissions of safety and other post-
marketing information and reports, registration and listing requirements, requirements relating to
manufacturing, quality control, quality assurance and corresponding maintenance of records and
documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if
marketing authorization of a product candidate is granted, the approval may be subject to limitations on
the indicated uses for which the product may be marketed or to the conditions of approval, including the
FDA requirement to implement a risk evaluation and mitigation strategy to ensure that the benefits of a
drug or biological product outweigh its risks.
The FDA, EMA and other national authorities may also impose requirements for costly post-marketing
studies or clinical trials and surveillance to monitor the safety or efficacy of a product, such as long-term
observational studies on natural exposure. The FDA and other agencies, including the U.S. Department of
Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure
that they are manufactured, marketed and distributed only for the approved indications and in accordance
with the provisions of the approved labeling. Later discovery of previously unknown problems with our
product candidates or with manufacturing processes, including adverse events of unanticipated severity or
frequency, or failure to comply with regulatory requirements, may result in revisions to the approved
labeling to add new safety information; imposition of post-market studies or clinical studies to assess new
safety risks, or the imposition of distribution or other restrictions including suspension of production and/
or distribution and withdrawal of regulatory approvals. Failure to comply with these requirements may
lead to financial penalties, compliance expenditures, total or partial suspension of production and/or
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distribution, product seizure or detention, refusal to permit the import or export of products, suspension of
the applicable regulator’s review of a company’s submissions, enforcement actions, product recalls,
injunctions and even criminal prosecution, any of which could materially and adversely affect our
business, financial condition and results of operations.
Our future growth depends, in part, on our ability to penetrate multiple markets, in which we would be
subject to additional regulatory burdens and other risks and uncertainties.
Our future profitability will depend, in part, on our ability to commercialize our product candidates, if
approved, in markets in Europe, the United States and other countries where we maintain
commercialization rights. If we commercialize our product candidates, if approved, in multiple markets,
we would be subject to additional risks and uncertainties, including:
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foreign currency exchange rate fluctuations and currency controls;
economic weakness, including inflation, or political instability in particular economies and
markets;
potentially adverse and/or unexpected tax consequences, including penalties due to the failure
of tax planning or due to the challenge by tax authorities on the basis of transfer pricing and
liabilities imposed from inconsistent enforcement;
the burden of complying with complex and changing regulatory, tax, accounting and legal
requirements, many of which vary between countries;
different medical practices and customs in multiple countries affecting acceptance of drugs in
the marketplace;
differing payor reimbursement regimes, governmental payors or patient self-pay systems and
price controls;
tariffs, trade barriers, import or export licensing requirements or other restrictive actions;
compliance with tax, employment, immigration and labor laws for employees living or
traveling abroad;
workforce uncertainty in countries where labor unrest is common;
reduced or loss of protection of intellectual property rights in some foreign countries, and
related prevalence of generic alternatives to therapeutics; and
becoming subject to the different, complex and changing laws, regulations and court systems
of multiple jurisdictions and compliance with a wide variety of foreign laws, treaties and
regulations.
These and other risks associated with international operations may adversely affect our ability to attain or
maintain profitable operations. Future sales of our product candidates, if they are approved, will be
dependent on purchasing decisions of and reimbursement from government health administration
authorities, distributors and other organizations. As a result of adverse conditions affecting the global
economy and credit and financial markets, including disruptions due to political instability or otherwise,
these organizations may defer purchases, may be unable to satisfy their purchasing or reimbursement
obligations, or may affect milestone payments or royalties for monalizumab or any of our product
candidates that are approved for commercialization in the future. Should any of these risks materialize,
this could have a material adverse effect on our business, prospects, financial condition and results of
operations.
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Even if our product candidates obtain regulatory approval, they will be subject to continuous
regulatory review.
If marketing authorization is obtained for any of our product candidates, the candidate will remain subject
to continuous review and therefore authorization could be subsequently withdrawn or restricted. We will
be subject to ongoing obligations and oversight by regulatory authorities, including adverse event
reporting requirements, marketing restrictions and, potentially, other post-marketing obligations, all of
which may result in significant expense and limit our ability to commercialize such products. For
example, we will be responsible for the completion of an FDA required post-marketing trial of Lumoxiti.
If there are changes in the application of legislation or regulatory policies, or if problems are discovered
with a product or our manufacture of a product, or if we or one of our distributors, licensees or co-
marketers fails to comply with regulatory requirements, the regulators could take various actions. These
include imposing fines on us, imposing restrictions on the product or its manufacture and requiring us to
recall or remove the product from the market. The regulators could also suspend or withdraw our
marketing authorizations, requiring us to conduct additional clinical trials, change our product labeling or
submit additional applications for marketing authorization. If any of these events occurs, our ability to sell
such product may be impaired, and we may incur substantial additional expense to comply with
regulatory requirements, which could materially adversely affect our business, financial condition and
results of operations.
Even if one of our product candidates has orphan drug designation, we may not be able to obtain any
benefit from such designation. Furthermore, if a product is granted orphan drug exclusivity in the
same indication for which we are developing lacutamab or our other product candidates that is granted
orphan drug designation, we may not be able to have our product candidate approved by the applicable
regulatory authority for a significant period of time.
Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs
for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may
designate a product candidate as an orphan drug if it is a drug intended to treat a rare disease or condition,
which is generally defined as a patient population of fewer than 200,000 individuals in the United States.
In the European Union, the European Commission may designate a product candidate as an orphan
medicinal product if it is a medicine for the diagnosis, prevention or treatment of life-threatening or very
serious conditions that affects not more than five in 10,000 persons in the European Union, or it is
unlikely that marketing of the medicine would generate sufficient returns to justify the investment needed
for its development. Generally, if a product candidate with an orphan drug designation receives the first
marketing approval for the indication for which it has such designation, the product is entitled to a period
of marketing exclusivity, which, subject to certain exceptions, precludes the FDA from approving the
marketing application of another drug for the same indication for that time period or precludes the EMA,
and other national drug regulators in the European Union, from accepting the marketing application for
another medicinal product for the same indication. The applicable period is seven years in the United
States and ten years in the European Union. The European Union period can be reduced to six years if a
product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable
so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost in the United States
if the FDA determines that the request for designation was materially defective or if the manufacturer is
unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or
condition. The granting of a request for orphan drug designation does not alter the standard regulatory
requirements and process for obtaining marketing approval.
Lacutamab has been granted orphan drug designation for CTCL in Europe and in the United States and
we may pursue orphan drug designation for another product candidate that we may develop in the future
in the United States and/or Europe. However, there is no assurance we will be able to receive orphan drug
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designation for other product candidates that we may develop in the United States and/or Europe or for
any other product candidate in any jurisdiction. Even if we are successful in obtaining orphan drug
designation, orphan drug status may not ensure that we have market exclusivity in a particular market.
Even if we obtain orphan drug exclusivity for any of our product candidates, that exclusivity may not
effectively protect the product from competition because exclusivity can be suspended under certain
circumstances. In the United States, even after an orphan drug is approved, the FDA can subsequently
approve another drug for the same condition if the FDA concludes that the later drug is clinically superior
in that it is shown to be safer, more effective or makes a major contribution to patient care. In the
European Union, orphan exclusivity will not prevent a marketing authorization being granted for a similar
medicinal product in the same indication if the new product is safer, more effective or otherwise clinically
superior to the first product or if the marketing authorization holder of the first product is unable to supply
sufficient quantities of the product. In addition, if another product is granted marketing approval and
orphan drug exclusivity in the same indication for which we are developing a product candidate with
orphan drug designation, we may not be able to have our product candidate approved by the applicable
regulatory authority for a significant period of time.
A fast track, breakthrough therapy or other designation by the FDA may not actually lead to a faster
development.
We may seek fast track, breakthrough therapy or similar designation for our product candidates. If a
product is intended for the treatment of a serious or life-threatening condition and the product
demonstrates the potential to address unmet medical need for this condition, the sponsor may apply for
FDA fast track designation. We have received fast track designation in the US and PRIME designation in
EU for lacutamab for the treatment of adult patients with relapsed or refractory Sézary syndrome who
have received at least two prior systemic therapies.
Additionally, we may in the future seek a breakthrough therapy designation or an equivalent in other
territories for some of our product candidates that reach the regulatory review process. A breakthrough
therapy is a drug candidate that is intended, alone or in combination with one or more other drugs, to treat
a serious or life-threatening disease or condition, and that, as indicated by preliminary clinical evidence,
may demonstrate substantial improvement over existing therapies on one or more clinically significant
endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated
as breakthrough therapies by the FDA are eligible for accelerated approval and increased interaction and
communication with the FDA designed to expedite the development and review process.
However, these designations do not ensure that we will experience a faster development process, review
or approval compared to conventional FDA procedures. In addition, the FDA may withdraw a designation
if it believes that the designation is no longer supported by data from our clinical development program.
A designation alone does not guarantee qualification for the FDA’s priority review procedures.
Priority review designation by the FDA may not lead to a faster regulatory review or approval process
and, in any event, does not assure FDA approval of our product candidates.
If the FDA determines that a product candidate offers major advances in treatment or provides a treatment
where no adequate therapy exists, the FDA may designate the product candidate for priority review. A
priority review designation means that the goal for the FDA to review an application is six months, rather
than the standard review period of ten months. We may request priority review for our product
candidates. The FDA has broad discretion with respect to whether or not to grant priority review status to
a product candidate, so even if we believe a particular product candidate is eligible for such designation or
status, the FDA may decide not to grant it. Moreover, a priority review designation does not necessarily
mean a faster regulatory review process or necessarily confer any advantage with respect to approval
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compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee
approval within the six-month review cycle or thereafter.
We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and
other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or
criminal penalties, other remedial measures and legal expenses, which could adversely affect our
business, results of operations and financial condition.
We are subject to other laws and regulations governing our international operations, including regulations
administered by the governments of the United States, and authorities in the European Union, including
applicable export control regulations, economic sanctions on countries and persons, customs requirements
and currency exchange regulations, collectively referred to as the trade control laws.
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying,
offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign
official, political party or candidate for the purpose of influencing any act or decision of the foreign entity
in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates
companies whose securities are listed in the United States to comply with certain accounting provisions
requiring the company to maintain books and records that accurately and fairly reflect all transactions of
the corporation, including international subsidiaries, and to devise and maintain an adequate system of
internal accounting controls for international operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a
recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry,
because, in many countries, hospitals are operated by the government, and doctors and other hospital
employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials
and other work have been deemed to be improper payments to government officials and have led to
FCPA enforcement actions.
French anti-corruption laws also prohibit acts of bribery and influence peddling:
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Articles 433-1 1° and 432-11 1° of the French Criminal Code (bribery of domestic public
officials);
Articles 433-1 2° and 432-11 2° of the French Criminal Code (influence peddling involving
domestic public officials);
Article 434-9 of the French Criminal Code (bribery of domestic judicial staff);
Article 434-9-1 of the French Criminal Code (influence peddling involving domestic judicial
staff);
Articles 445-1 and 445-2 of the French Criminal Code (bribery of private individuals);
Article 433-2 of the French Criminal Code (influence peddling involving private individuals);
Articles 435-1 and 435-3 of the French Criminal Code (bribery of foreign or international
public officials);
Articles 435-7 and 435-9 of the French Criminal Code (bribery of foreign or international
judicial staff);
Articles 435-2, 435-4, 435-8 and 435-10 of the French Criminal Code (active and passive
influence peddling involving foreign or international public officials and foreign or
international judicial staff); and
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French Law of December 9, 2017 on Transparency, the Fight Against Corruption and the
Modernization of the Economy (Sapin 2 Law).
There is no assurance that we will be effective in ensuring our compliance with all applicable anti-
corruption laws, including the FCPA, the French anti-corruption laws or other legal requirements,
including trade control laws. If we are not in compliance with the FCPA, the French anti-corruption laws
and other anti-corruption laws or trade control laws, we may be subject to criminal and civil penalties,
disgorgement and other sanctions and remedial measures, and legal expenses, which could have an
adverse impact on our business, financial condition, results of operations and liquidity. Likewise, any
investigation of any potential violations of the FCPA, the French anti-corruption laws, other anti-
corruption laws or trade control laws by U.S. or other authorities could also have an adverse impact on
our reputation, our business, results of operations and financial condition.
We are subject to healthcare laws and regulations which may require substantial compliance efforts
and could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and
diminished profits and future earnings, among other penalties.
Healthcare providers, physicians and others will play a primary role in the recommendation and
prescription of our products, if approved. Our arrangements with such persons and third-party payors and
our operations will expose us to broadly applicable fraud and abuse and other healthcare laws and
regulations that may constrain the business or financial arrangements and relationships through which we
research, market, sell and distribute our products, if we obtain marketing authorization. Restrictions under
applicable U.S. federal, state and foreign healthcare laws and regulations include, but are not limited to,
the following:
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the U.S. Anti-Kickback Statute, which prohibits, among other things, persons or entities from
knowingly and willfully soliciting, offering, receiving or providing remuneration, including
any kickback, bribe or rebate, directly or indirectly, in cash or in kind, to induce or reward, or
in return for, either the referral of an individual for, or the purchase or lease, order or
recommendation of, any item, good, facility or service, for which payment may be made under
federal healthcare programs such as Medicare and Medicaid;
U.S. federal civil and criminal false claims laws and civil monetary penalties laws, including
the civil False Claims Act, which impose criminal and civil penalties, including those from
civil whistle-blower or qui tam actions, against individuals or entities for, among other things,
knowingly presenting, or causing to be presented, claims for payment that are false or
fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay
money to the federal government;
the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, which
created additional federal criminal statutes that impose criminal and civil liability for, among
other things, executing or attempting to execute a scheme to defraud any healthcare benefit
program or knowingly and willingly falsifying, concealing or covering up a material fact or
making false statements relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health
Act and its implementing regulations, which impose certain requirements on covered entities
and their business associates, including mandatory contractual terms, with respect to
safeguarding the privacy, security and transmission of individually identifiable health
information;
U.S. federal transparency requirements under the Physician Payments Sunshine Act, enacted
as part of the ACA, that require applicable manufacturers of covered drugs, devices, biologics
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and medical supplies for which payment is available under Medicare, Medicaid, or the
Children’s Health Insurance Program, with specific exceptions, to track and annually report to
CMS payments and other transfers of value provided to physicians and teaching hospitals, and
certain ownership and investment interests held by physicians or their immediate family
members; and
analogous state or foreign laws and regulations, such as state anti-kickback and false claims
laws, including the French “Bertrand Law”, French Ordinance n°2017-49 of January 19, 2017,
and the UK’s Bribery Act 2010, which may apply to items or services reimbursed by any
third-party payor, including commercial insurers, state marketing and/or transparency laws
applicable to manufacturers that may be broader in scope than the federal requirements, state
laws that require biopharmaceutical companies to comply with the biopharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated
by the federal government, state laws that require the reporting of information relating to drug
and biologic pricing; state and local laws that require the registration of pharmaceutical sales
representatives and state laws governing the privacy and security of health information in
certain circumstances, many of which differ from each other in significant ways and may not
have the same effect as HIPAA, thus complicating compliance efforts.
Ensuring that our business arrangements with third parties comply with applicable healthcare laws and
regulations will likely be costly. It is possible that governmental authorities will conclude that our
business practices do not comply with current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in
violation of any of these laws or any other governmental regulations that may apply to us, we may be
subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement,
imprisonment, possible exclusion from government funded healthcare programs, such as Medicare and
Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity
agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual
damages, reputational harm, diminished profits and future earnings, and curtailment of our operations,
any of which could substantially disrupt our operations. If the physicians or other providers or entities
with whom we expect to do business are found not to be in compliance with applicable laws, they may be
subject to criminal, civil or administrative sanctions, including exclusions from government funded
healthcare programs. Should any of these risks materialize, this could have a material adverse effect on
our business, prospects, financial condition and results of operations.
European data collection is governed by restrictive regulations governing the collection, use,
processing and cross-border transfer of personal information.
We may collect, process, use or transfer personal information from individuals located in the European
Union in connection with our business, including in connection with conducting clinical trials in the
European Union. Additionally, we intend to commercialize Lumoxiti, and any of our product candidates
that receive marketing approval, in the European Union. The collection and use of personal health data in
the European Union are governed by the provisions of the General Data Protection Regulation ((EU)
2016/679), or the GDPR. This legislation imposes requirements relating to having legal bases for
processing personal information relating to identifiable individuals and transferring such information
outside of the European Economic Area, or EEA, including to the United States, providing details to
those individuals regarding the processing of their personal information, keeping personal information
secure, having data processing agreements with third parties who process personal information,
responding to individuals’ requests to exercise their rights in respect of their personal information,
reporting security breaches involving personal data to the competent national data protection authority
and affected individuals, appointing data protection officers, conducting data protection impact
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assessments and record-keeping. The GDPR imposes additional responsibilities and liabilities in relation
to personal data that we process and we may be required to put in place additional mechanisms ensuring
compliance with the new data protection rules. Failure to comply with the requirements of the GDPR and
related national data protection laws of the member states of the European Union may result in substantial
fines, other administrative penalties and civil claims being brought against us, which could have a
material adverse effect on our business, prospects, financial condition and results of operations.
Risks Related to our Reliance on Third Parties
We have no manufacturing capabilities and rely on third-party manufacturers for our product
candidates.
Our product candidates that are tested during our preclinical and clinical trials are manufactured by third
parties. We have no production capabilities and rely on third parties to manufacture our products.
This strategy means that we do not directly control certain key aspects of our product development, such
as:
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the quality of the product manufactured;
the delivery times for drugs for a given clinical trial;
the clinical and commercial quantities that can be supplied; and
compliance with applicable laws and regulations.
Our reliance on third-party manufacturers creates risks that may not exist if we had our own
manufacturing capabilities. These risks include:
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failure of third-party manufacturers to comply with regulatory and quality-control standards;
production of insufficient quantities;
damage during transport and/or storage of our product candidates;
breach of agreements by third-party manufacturers; and
termination or non-renewal of the agreements for reasons beyond our control.
Should our third-party manufacturers breach their obligations or should we fail to renew our contracts
with them, we cannot guarantee that we will be able to find new suppliers within a timeframe and under
conditions that would not be detrimental. We could also be faced with delays or interruptions in our
supplies, which could result in a delay in the clinical trials and, ultimately, a delay in the
commercialization of the product candidates that we are developing. For example, manufacturing issues,
leading to out-of-specification product, can occur during a manufacturing campaign at the CMO in charge
of the production of our product candidates.
Reproducing a batch of product is a lengthy and costly process and sometimes can lead to drug shortage
that can in turn lead to a delay in the development of the candidate, or even an early stop of a clinical trial.
This happened in the early clinical development of lacutamab and led to the decision to limit the number
of patients in order to ensure drug supply for treated patients in the Phase I clinical trial.
In November 2019, Impletio Wirkstoffabfüllung GmbH (formerly known as Rentschler Fill Solutions
GmbH), the subcontractor in charge of the fill-and-finish manufacturing operations of lacutamab,
unilaterally decided to withdraw the certificates of conformance of all clinical batches produced at their
facilities, including the lacutamab batch used for the TELLOMAK Phase II clinical trial assessing
lacutamab in multiple indications. Impletio Wirkstoffabfüllung GmbH decided to withdraw the
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certificates of conformance even though the compliance of its manufacturing site with Good
Manufacturing Practices has been confirmed by two on-site inspections performed by the Austrian Health
Agency before and after we began to work with them.
The transfer of the manufacturing process to another contract manufacturing organization took few
months and came with additional costs but allowed us to have a conform batch in the middle of 2020 and
to resume the enrollment and treatment of patients in the clinical trials after getting Regulatory Agencies
approval. During this period of time, the TELLOMAK trial has been placed on partial or full hold in the
U.S., Spain, Germany and Italy.
Should any of these risks materialize, this could have a material adverse effect on our business, prospects,
financial condition and results of operations.
We are reliant upon third parties to manufacture and supply components of certain substances
necessary to manufacture Lumoxiti and our product candidates.
We are reliant on several third-party CMOs for the manufacture and supply of components and
substances for all of the product candidates we are developing. In addition, certain component materials
are currently available from a single supplier, or a small number of suppliers. We cannot be sure that
these suppliers will remain in business, or that they will not be purchased by one of our competitors or
another company that is not interested in continuing to manufacture these materials for us. We cannot
assure that, if required, we will be able to identify alternate sources with the desired scale and capability
and establish relationships with such sources. A loss of any CMO or component supplier and delay in
establishing a replacement could delay our clinical development and regulatory approval process.
Our production costs may be higher than we currently estimate.
Our product candidates are manufactured according to manufacturing best practices applicable to drugs
for clinical trials and to specifications approved by the applicable regulatory authorities. If any of our
products were found to be non-compliant, we would be required to manufacture the product again, which
would entail additional costs and may prevent delivery of the product to patients on time.
Other risks inherent in the production process may have the same effect, such as:
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contamination of the controlled atmosphere area;
unusable premises and equipment;
new regulatory requirements requiring a partial and/or extended stop to the production unit to
meet the requirements;
unavailable qualified personnel;
power failure of extended duration; and
logistical error.
Should any of these risks materialize, this could have a material adverse effect our business, prospects,
financial condition and results of operations.
We rely on third parties to supply key materials used in our research and development, to provide
services to us and to assist with clinical trials.
We make considerable use of third-party suppliers for the key materials used in our business. The failure
of third-party suppliers to comply with regulatory standards could result in the imposition of sanctions on
us. These sanctions could include fines, injunctions, civil penalties, refusal by regulatory organizations to
grant approval to conduct clinical trials or marketing authorization for our products, delays, suspension or
withdrawal of approvals, license revocation, seizure or recalls of our products, operating restrictions and
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legal proceedings. Furthermore, the presence of non-conformities, as detected in regulatory toxicology
studies, could result in delays in the development of one or more of our product candidates and would
require further tests to be financed. Although we are involved in establishing the protocols for the
production of these materials, we do not control all the stages of production and cannot guarantee that the
third parties will fulfil their contractual and regulatory obligations. In particular, a partner’s failure to
comply with protocols or regulatory constraints, or repeated delays by a partner, could compromise the
development of our products or limit its liability. Such events could also inflate the product development
costs incurred by us.
We also use third parties to provide certain services such as scientific, medical or strategic consultancy
services. These service providers are generally selected for their specific expertise, as is the case with the
academic partners with whom we collaborate. To build and maintain such a network under acceptable
terms, we face intense competition. Such external collaborators may terminate, at any time, their
involvement. We can exert only limited control over their activities. We may not be able to obtain the
intellectual property rights to the product candidates or technologies developed under collaboration,
research and license agreements under acceptable terms or at all. Moreover, our scientific collaborators
may assert intellectual property rights or other rights beyond the terms of their engagement.
Finally, we use third-party investigators to assist with conducting clinical trials. All clinical trials are
subject to strict regulations and quality standards. Should any of these risks materialize, this could have a
material adverse effect on our business, prospects, financial condition and results of operations.
We and our collaborators rely on third parties to conduct some of our preclinical studies and clinical
trials and perform other clinical development tasks. If these third parties do not successfully carry out
their contractual duties, meet expected deadlines or comply with regulatory requirements, it may not be
possible to obtain regulatory approval for, or commercialize, our product candidates and our business
could be substantially harmed.
We have relied upon and plan to continue to rely upon third parties to conduct clinical trials of our
product candidates or product candidates that we have licensed to them. For example, under our license
and collaboration agreements with AstraZeneca, AstraZeneca is responsible for a number of clinical trials
relating to monalizumab and IPH5201, which are subject to such agreements. In addition, we and our
collaborators are responsible for and are supporting several clinical trials that are sponsored by academic
or research institutions, known as investigator-sponsored trials. By definition, the financing, design and
conduct of an investigator-sponsored trial are the sole responsibility of the sponsor, and we or our
collaborators, as applicable, have limited control over these aspects of these clinical trials, or the timing
and reporting of the data from these trials. We and our collaborators also depend on independent clinical
investigators and Contract Research Organizations, or CROs, to conduct clinical trials. CROs may also
assist in the collection and analysis of data. There are a limited number of CROs that have the expertise to
run clinical trials of our product candidates. Identifying, qualifying and managing performance of third-
party service providers can be difficult and time consuming and can cause delays in our development
programs. These investigators and CROs are not our employees and we are not able to control, other than
by contract, the amount of resources, including the amount of time, that they devote to our product
candidates and clinical trials. If the investigators sponsoring trials of our product candidates, independent
investigators participating in clinical trials that we or our collaborators are sponsoring or CROs fail to
devote sufficient resources to our clinical trials and development of our product candidates or product
candidates we have licensed to others, or if their performance is substandard, it may delay or compromise
the prospects for approval and commercialization of any product candidates that we or our collaborators
develop. In addition, the use of third-party service providers requires us to disclose our proprietary
information to these parties, which could increase the risk that this information will be misappropriated,
and we may not be able to obtain adequate remedies for such disclosure or misappropriation. Further, the
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FDA, EMA and other regulatory authorities require that we comply with standards, commonly referred to
as Good Clinical Practice, or GCP, and other local legal requirements, including data privacy regulations,
for conducting, recording and reporting clinical trials to assure that data and reported results are credible
and accurate and that the rights, integrity and confidentiality of clinical trial subjects are protected. If
clinical investigators or CROs fail to meet their obligations to us or comply with GCP procedures or other
applicable legal requirements, the data generated in these trials may be deemed unreliable and the FDA,
EMA or comparable foreign regulatory authorities may require us to perform additional trials before
approving our marketing applications. We cannot assure that upon inspection by a given regulatory
authority, such regulatory authority will determine that all of our clinical trials comply with GCP
regulations.
In addition, our clinical trials must be conducted with product produced under current Good
Manufacturing Practice, or cGMP, regulations. Our failure to comply with these regulations may require
us to repeat clinical trials, which would delay the regulatory approval process. If clinical investigators or
CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if
they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the
failure to adhere to our protocol or regulatory requirements, or for other reasons, our clinical trials or
those of our collaborators may be extended, delayed or terminated, and we or our collaborators may not
be able to obtain regulatory approval for or successfully commercialize our product candidates. As a
result, our results of operations and the commercial prospects for our product candidates would be
harmed, our costs could increase and our ability to generate revenue could be delayed.
Manufacturing facilities and clinical trial sites are subject to significant government regulations and
approvals and if our or our partners’ third-party manufacturers fail to comply with these regulations
or maintain these approvals, our business could be materially harmed.
Our third-party manufacturers are subject to ongoing regulation and periodic inspection by national
authorities, including the EMA, FDA and other regulatory bodies to ensure compliance with cGMP, when
producing batches of Lumoxiti and our product candidates for clinical trials. CROs and other third-party
research organizations must also comply with Good Laboratory Practices (GLP) when carrying out
regulatory toxicology studies. Any failure to follow and document our or their adherence to such GMP
and GLP regulations or other regulatory requirements may lead to significant delays in the availability of
products for commercial sale or clinical trials, may result in the termination of or a hold on a clinical trial,
or may delay or prevent filing or approval of marketing applications for our products.
Failure to comply with applicable regulations could also result in national authorities, the EMA, FDA or
other applicable regulatory authorities taking various actions, including:
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levying fines and other civil penalties;
imposing consent decrees or injunctions;
requiring us to suspend or put on hold one or more of our clinical trials;
suspending or withdrawing regulatory approvals;
delaying or refusing to approve pending applications or supplements to approved applications;
requiring us to suspend manufacturing activities or product sales, imports or exports;
requiring us to communicate with physicians and other customers about concerns related to
actual or potential safety, efficacy, and other issues involving our products;
mandating product recalls or seizing products;
imposing operating restrictions; and
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seeking criminal prosecutions.
Any of the foregoing actions could be detrimental to our reputation, business, financial condition or
operating results. Furthermore, our key suppliers may not continue to be in compliance with all applicable
regulatory requirements, which could result in our failure to produce our products on a timely basis and in
the required quantities, if at all. In addition, before any additional products would be considered for
marketing authorization in Europe, the United States or elsewhere, our suppliers will have to pass an
inspection by the applicable regulatory agencies. We are dependent on our suppliers’ cooperation and
ability to pass such inspections, and the inspections and any necessary remediation may be costly. Failure
to pass such inspections by us or any of our suppliers would affect our ability to commercialize our
product candidates in Europe, the United States or elsewhere. Should any of these risks materialize, this
could have a material adverse effect on our business, prospects, financial condition and results of
operations. For example, in November 2019, Impletio Wirkstoffabfüllung GmbH (formerly known as
Rentschler Fill Solutions GmbH), the subcontractor in charge of the fill-and-finish manufacturing
operations of lacutamab unilaterally decided to withdraw the certificates of conformance of all clinical
batches produced at their facilities, including the lacutamab batch used for the TELLOMAK Phase II
clinical trial assessing lacutamab in multiple indications, which resulted in partial or full holds in a
number of countries.
We depend upon our existing collaboration partners, AstraZeneca, Sanofi and other third parties, and
may depend upon future collaboration partners to commit to the research, development,
manufacturing and marketing of our drugs.
We have significant collaborations with AstraZeneca for the development of monalizumab, IPH5201 and
other product candidates. We also collaborate with Sanofi for the development of IPH61, and we may
enter into additional collaborations for other of our product candidates or technologies in development.
We cannot control the timing or quantity of resources that our existing or future collaborators will
dedicate to research, preclinical and clinical development, manufacturing or marketing of our products.
Our collaborators may not perform their obligations according to our expectations or standards of quality.
Our collaborators could terminate our existing agreements for a number of reasons, including that they
may have other, higher priority products in development or because our partnered programs may no
longer be a priority for them. If any of our collaboration agreements were to be terminated, we could
encounter significant delays in developing our product candidates, lose the opportunity to earn any
revenues we expected to generate under such agreements, incur unforeseen costs, and suffer damage to
the reputation of our product, product candidates and as a company generally.
In order to optimize the launch and market penetration of certain of our future product candidates, we
may enter into distribution and marketing agreements with pharmaceutical industry leaders. For these
product candidates, we would not market our products alone once they have obtained marketing
authorization. The risks inherent in entry into these contracts are as follows:
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the negotiation and execution of these agreements is a long process that may not result in an
agreement being signed or that can delay the development or commercialization of the product
candidate concerned;
these agreements are subject to cancellation or non-renewal by our collaborators, or may not
be fully complied with by our collaborators;
in the case of a license granted by us, we lose control of the development of the product
candidate licensed; in such cases we would have only limited control over the means and
resources allocated by our partner for the commercialization of our product; and
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collaborators may not properly obtain, maintain, enforce, or defend our intellectual property or
proprietary rights or may use our proprietary information in such a way as to invite litigation
that could jeopardize or invalidate our proprietary information or expose us to potential
litigation.
Should any of these risks materialize, or should we fail to find suitable collaborators, this could have a
material adverse effect on our business, prospects, financial condition and results of operations.
The late-stage development and marketing of our product candidates may partially depend on our
ability to establish collaborations with major biopharmaceutical companies.
In order to develop and market some of our product candidates, we rely on collaboration, research and
license agreements with pharmaceutical companies to assist us in the development of product candidates
and the financing of their development. For our most advanced clinical product candidate, monalizumab,
we entered into an agreement with AstraZeneca, in part because of their late-stage development and
marketing capabilities. As we identify new product candidates, we will determine the appropriate strategy
for development and marketing, which may result in the need to establish collaborations with major
biopharmaceutical companies. We may also enter into agreements with institutions and universities to
participate in our other research programs and to share intellectual property rights.
We may fail to find collaboration partners and to sign new agreements for our other product candidates
and programs. The competition for partners is intense, and the negotiation process is time-consuming and
complex. Any new collaboration may be on terms that are not optimal for us, and we may not be able to
maintain any new collaboration if, for example, development or approval of a product candidate is
delayed, sales of an approved product candidate do not meet expectations or the collaborator terminates
the collaboration. Any such collaboration, or other strategic transaction, may require us to incur non-
recurring or other charges, increase our near- and long-term expenditures and pose significant integration
or implementation challenges or disrupt our management or business. These transactions would entail
numerous operational and financial risks, including exposure to unknown liabilities, disruption of our
business and diversion of our management’s time and attention in order to manage a collaboration or
develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive
issuances of equity securities to pay transaction consideration or costs, higher than expected
collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges,
increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the
operations and personnel of any acquired business, impairment of relationships with key suppliers,
manufacturers or customers of any acquired business due to changes in management and ownership and
the inability to retain key employees of any acquired business. Accordingly, although there can be no
assurance that we will undertake or successfully complete any transactions of the nature described above,
any transactions that we do complete may be subject to the foregoing or other risks and have a material
and adverse effect on our business, financial condition, results of operations and prospects. Conversely,
any failure to enter any additional collaboration or other strategic transaction that would be beneficial to
us could delay the development and potential commercialization of our product candidates and have a
negative impact on the competitiveness of any product candidate that reaches market.
We do not and will not have access to all information regarding our product candidates that are subject
to collaboration and license agreements. Consequently, our ability to inform our shareholders about
the status of product candidates that are subject to these agreements, and our ability to make business
and operational decisions, may be limited.
We do not and will not have access to all information regarding our product candidates that are subject to
our license and collaboration agreements with AstraZeneca, Sanofi and other third parties, including
potentially material information about clinical trial design, execution and timing, safety and efficacy,
39
clinical trial results, regulatory affairs, manufacturing, marketing and other areas known by our
collaborators. In addition, we have confidentiality obligations under our collaboration and license
agreements. Therefore, our ability to keep our shareholders informed about the status of product
candidates subject to such agreements will be limited by the degree to which our collaborators keep us
informed and allow us to disclose information to the public or provide such information to the public
themselves. If our collaborators do not inform us about our product candidates subject to agreements with
them, we may make operational and investment decisions that we would not have made had we been fully
informed, which may have an adverse impact on our business, prospects, financial condition and results
of operations.
Risks related to the return of Lumoxiti commercialization rights to AstraZeneca
In December 2020, the Company decided to return the commercial rights of Lumoxiti in the US and
Europe to AstraZeneca. Innate had licensed these rights from AstraZeneca in October 2018. Lumoxiti is
an approved drug in the US. In Europe, a marketing authorization application has been filed by
AstraZeneca with a view to transferring the authorization to Innate Pharma once it is obtained. This
transfer of authorization in Europe will not take place and Innate Pharma will therefore not be the holder
of this application.
Following this decision, the two companies have started working on the development of a transition plan,
including an agreement on costs and timing of the transfer of commercial rights and distribution of
Lumoxiti in the United States to AstraZeneca in 2021.
As of the date of publication of this document, this agreement has not been finalized and may take longer
than expected to complete, on terms unfavorable to the Company, or may not be completed.
While the agreement is being developed, the Company continues to provide support to patients and
customers, as well as supply of the product. Thus, if the negotiation of this agreement were to take longer
than we anticipate, and/or the transition period was to be extended, we may incur greater costs in
connection with patient support and distribution activities.
If no agreement is reached between the Company and AstraZeneca, the Company could also incur costs
estimated at $12.8 million for manufacturing and distribution activities.
In addition, if this agreement is not concluded, the situation could also have consequences in terms of the
Company's reputation, particularly if we were to remain the holder of the marketing authorization in the
United States and could not continue to carry out the operations arising from it. This situation could also
have adverse effects on our operations insofar as it would mobilize some of our management personnel
and divert them from the implementation of the Company's strategy and objectives.
Risks Related to our Financial Position and Capital Needs
We have incurred and may in the future incur significant operational losses related to our research
and development activities.
We have incurred net losses in each year since our inception except for the years ended December 31,
2016 and 2018. Our net income (loss) was €(64.0) million and €(20.8) million for the years ended
December 31, 2020 and 2019, respectively. Substantially all of our net losses resulted from costs incurred
in connection with our development programs and from selling, general and administrative expenses
associated with our ongoing operations. We expect to incur significant expenses and operating losses for
the foreseeable future.
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We currently only have one product, Lumoxiti, that has received regulatory approval for sale or has
generated revenues from commercial sales, and none of our other product candidates have received
regulatory approval. Unless this happens, the likelihood and amount of our future operational losses will
depend on several factors, including the pace and amount of our future expenditures in connection with
our product candidates and development programs and our ability to obtain funding through milestone or
royalty payments under our license and collaboration agreements, equity or debt financings, strategic
collaborations and government grants and tax credits. We expect that our main source of income for the
near- and medium-term will be:
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payments received under our license and collaboration agreements with third parties, including
AstraZeneca and Sanofi; and
government grants and research tax credits.
The interruption of one of those sources of income, including as a result of the COVID-19 pandemic,
could have a material adverse effect on our business, prospects, financial condition and results of
operations. See “—The recent global COVID-19 pandemic could adversely affect our business, financial
condition and results of operations.”
Our ability to be profitable in the future will depend on our ability to generate revenue from sales relating
to our product candidates, if approved, and our ability to obtain regulatory approval for marketing our
product candidates. If our product candidates receive regulatory approval, our future revenues will depend
upon the size of any markets in which our product candidates have received approval, and market
acceptance, reimbursement from third-party payors and market share. Any of these factors could have a
material adverse effect on our business, prospects, financial condition and results of operations.
We may need to raise additional funding to complete the development and any commercialization of
our product candidates, which may not be available on acceptable terms, or at all, and failure to obtain
this necessary capital when needed may force us to delay, limit or terminate our product development
efforts or other operations.
We are currently advancing our product candidates through preclinical and clinical development, and
anticipate relying on partners as we advance them. We currently retain the full development and
marketing rights to lacutamab and avdoralimab and may retain rights to additional proprietary product
candidates in the future. The development of immunotherapy product candidates is expensive, and we
expect our research and development expenses to increase as we advance our product candidates through
clinical trials and regulatory approvals. If clinical trials are successful and if we obtain regulatory
approval for product candidates that we develop, we expect to incur commercialization expenses before
these product candidates are marketed and sold.
We anticipate that our expenses will increase substantially if and as we:
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continue our research, preclinical and clinical development of our product candidates if our
current collaboration partners cease their collaborations with us;
expand the scope of our current clinical trials for our product candidates;
initiate additional preclinical, clinical or other studies for our product candidates;
further develop manufacturing processes for our product candidates;
change or add additional manufacturers or suppliers;
seek regulatory and marketing authorizations for our product candidates that successfully
complete clinical studies;
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establish a sales, marketing and distribution infrastructure to commercialize Lumoxiti and any
other products for which we may obtain marketing authorization;
seek to identify and validate additional product candidates that may result in additional
preclinical, clinical or other product studies;
acquire or in-license other product candidates and technologies;
make milestone or other payments under any in-license agreements;
maintain, protect, defend and expand our intellectual property portfolio;
attract and retain new and existing skilled personnel;
create additional infrastructure to support our operations as a public company in the United
States following the completion of the October 2019 global offering; and
experience any delays or encounter issues with any of the above.
As of December 31, 2020, we had cash, cash equivalents, short-term investments and non-current
financial assets of €190.6 million. We believe our cash, cash equivalents, short-term investments and non-
current financial assets together with our cash flow from operations, will be sufficient to fund our
operations for the next twelve months. However, in order to complete the development process, obtain
regulatory approval and, if approved, commercialize our product candidates that we are developing in-
house, including lacutamab and avdoralimab, develop our proprietary technology and develop a pipeline
of additional product candidates, we will require additional funding. Our existing resources may not be
sufficient to cover any additional financing needs, in which case new funding would be required. See “—
We have incurred and may in the future incur significant operational losses related to our research and
development activities.” The conditions and arrangements for such new financing would depend, among
other factors, on economic and market conditions that are beyond our control, including the current
volatility in the capital markets as a result of the COVID-19 pandemic. See “—The recent global
COVID-19 pandemic could adversely affect our business, financial condition and results of operations.”
Any additional fundraising efforts may divert our management from their day-to-day activities, which
may adversely affect our ability to develop and commercialize our product candidates. In addition, we
cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us,
if at all. Under French law, our share capital may be increased only with shareholders’ approval at an
extraordinary general shareholders’ meeting on the basis of a report from the Executive Board. In
addition, the French Commercial Code imposes certain limitations on our ability to price certain offerings
of our share capital without preferential subscription rights (droit préférentiel de souscription), which
limitation may prevent us from successfully completing any such offering. See “Description of Share
Capital—Key Provisions of Our Bylaws and French Law Affecting Our Ordinary Shares.”
Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders
and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance,
may cause the market price of our ordinary shares or the ADSs to decline. The sale of additional equity or
convertible securities would dilute our shareholders. We may seek funds through arrangements with
collaborative partners or otherwise at an earlier stage of product development than otherwise would be
desirable and we may be required to relinquish rights to some of our technologies or product candidates
or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our
business, prospects, financial condition and results of operations.
If we need and are unable to obtain funding on a timely basis, we may be required to significantly curtail,
delay or discontinue one or more of our research or development programs or the commercialization of
any product or product candidate or we may be unable to expand our operations or otherwise capitalize on
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our business opportunities as desired, which could impair our growth prospects. Should any of these risks
materialize, this could have a material adverse effect on our business, prospects, financial condition and
results of operations.
The terms of our loan agreement with Société Générale and certain other loan obligations place
restrictions on our operating and financial flexibility.
In July 2017, we entered into a loan and security agreement with Société Générale (the “Loan
Agreement”) in order to finance the construction of our future headquarters. The Loan Agreement is
secured by collateral in the form of financial instruments valued at €15.2 million held at Société Générale.
As of December 31, 2020, we had drawn down €15.2 million under the Loan Agreement. The Loan
Agreement subjects us to a covenant to maintain a minimum balance of our total cash, cash equivalents
and current and non-current financial assets as of each fiscal year end at least equal to the amount of
outstanding principal under the Loan Agreement. Compliance with this covenant may limit our flexibility
in operating our business and our ability to take actions that might be advantageous to us and our
shareholders. For example, if we fail to meet our minimum cash covenant and we are unable to raise
additional funds or obtain a waiver or other amendment to the Loan Agreement, we may be required to
delay, limit, reduce or terminate certain of our clinical development efforts.
Additionally, we may be required to repay the entire amount of outstanding indebtedness under the Loan
Agreement in cash if we fail to stay in compliance with our covenant or suffer some other event of default
under the Loan Agreement. Under the Loan Agreement, an event of default will occur if, among other
things, we fail to make payments under the Loan Agreement or we breach our covenant under the Loan
Agreement. We may not have enough available cash or be able to raise additional funds through equity or
debt financings to repay such indebtedness at the time any such event of default occurs. In that case, we
may be required to delay, limit, reduce or terminate our clinical development efforts or grant rights to
others to develop and market product candidates that we would otherwise prefer to develop and market
ourselves. Société Générale could also exercise its rights as collateral agent to take possession and dispose
of the collateral securing the loan for its benefit. Our business, financial condition and results of
operations could be substantially harmed as a result of any of these events.
We are also subject to a €1.5 million PTZI loan (Prêt à Taux Zéro Innovation—interest-free loan for
innovation) from Banque Publique d’Investissement, or BPI France, entered into in 2013. In addition, in
2008 we entered into a finance lease agreement with Sogebail, a subsidiary of Société Générale. The
present value of all minimum lease payments under this agreement is €0.2 million as of December 31,
2020. Our business, financial condition and results of operations could likewise be substantially harmed
if, among other things, we fail to make payments under these agreements, or we breach any of our
covenants under these agreements.
If we do not achieve our product development or commercialization objectives in the timeframes we
expect, we may not receive product revenue or milestone or royalty payments and we may not be able to
conduct our operations as planned.
We have received and expect to continue to receive payments from our collaborators when we satisfy
certain pre-specified milestones in our licensing or collaboration agreements. We currently depend to a
large degree on these milestone payments from our existing collaborators in order to fund our operations
and we may enter into new collaboration agreements that also provide for milestone payments. For
example, we have granted options to license or acquire intellectual property rights in certain of our
programs to our collaborators which, if exercised, will result in up-front option exercise fees and,
assuming we meet all specified development, clinical, regulatory and sales milestones, could result in
substantial milestone payments. These milestone payments are generally dependent on the
accomplishment of various scientific, clinical, regulatory, sales and other product development objectives,
43
and the successful or timely achievement of many of these milestones is outside of our control, in part
because some of these activities are being or will be conducted by our collaborators. If we or our
collaborators fail to achieve the applicable milestones, we may not receive such milestone payments. A
failure to receive any such milestone payment may cause us to:
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delay, reduce or terminate certain research and development programs;
reduce headcount;
raise funds through additional equity or convertible debt financings that could be dilutive to
our shareholders and holders of our ADSs;
obtain funds through collaboration agreements that may require us to assign rights to
technologies or products that we would have otherwise retained;
sign new collaboration or license agreements that may be less favorable than those we would
have obtained under different circumstances; and
consider strategic transactions or engaging in a joint venture with a third-party.
In addition, although we may be eligible to receive an aggregate of approximately $5.4 billion in future
contingent payments from existing collaboration agreements and any license agreements that become
effective upon the exercise by our collaborators of options to license future product candidates, there is no
guarantee that we will receive any contingent payments or that our collaborators will exercise any options
to license or acquire additional intellectual property rights in any of our programs. If our collaborators
decide not to exercise such options with respect to a program, we will not receive the up-front option
exercise fee and will not be eligible to receive any of the related commercial, development, royalty or
other milestone payments. Even if our collaborators exercise such options with respect to a particular
program, we may never achieve the related milestones for any number of reasons. The failure to receive
milestone or royalty payments and the occurrence of any of the events above may have a material adverse
impact on our business, prospects, financial condition and results of operations.
The revenues generated from our collaboration and license agreements have contributed and are
expected to contribute a large portion of our revenue for the foreseeable future.
We have entered into collaboration and license agreements with pharmaceutical companies, including
AstraZeneca. The cash payments received from our partners were €57.8 million, €108.7 million and €40.3
million for the years ended December 31, 2020, 2019 and 2018, respectively.
We also enhance our research efforts by establishing collaborations with academic or non-profit research
institutions and other biopharmaceutical companies. The participation in these collaborations may
generate revenue and funding in the form of operating grants or the reimbursement of research and
development expenses.
We may not be able to renew or maintain our license agreements or collaborative research contracts or
may be unable to sign new agreements with new collaborators on reasonable terms or at all. The early
termination of a contract, the non-renewal of a contract or our inability to find new collaborators would
adversely affect our business. Should any of these risks materialize, this could have an adverse effect on
our business, prospects, financial condition and results of operations.
We benefit from tax credits in France that could be reduced or eliminated.
As a French biopharmaceutical company, we benefit from certain tax advantages, including the Research
Tax Credit (Crédit Impôt Recherche), which is a French tax credit aimed at stimulating research and
development. The Research Tax Credit is calculated based on our claimed amount of eligible research and
development expenditures in France and represented €13.1 million, €16.7 million and €13.5 million for
44
the years ended December 31, 2020, 2019 and 2018, respectively. The Research Tax Credit is a source of
financing to us that could be reduced or eliminated by the French tax authorities or by changes in French
tax law or regulations.
The Research Tax Credit can be offset against French corporate income tax due by the company with
respect to the year during which the eligible research and development expenditures have been made. The
portion of tax credit in excess which is not being offset, if any, represents a receivable against the French
Treasury which can in principle be offset against the French corporate income tax due by the company
with respect to the three following years. The remaining portion of tax credit not being offset upon expiry
of such a period may then be refunded to the company.
Until the end of the year ended December 31, 2018, we qualified as a small- and medium-size business
and the French Treasury refunded each of our 2016, 2017 and 2018 Research Tax Credit claims
immediately (meaning that, in practice, we received the refund during the year following the year in
which the eligible research and development expenditures are made). We no longer qualify as a small and
medium-size business since the year ended December 31, 2019, and therefore, we will no longer be
entitled to the immediate reimbursement of the Research Tax Credit but instead will be reimbursed within
the expiry of the period of three years mentioned above.
The French tax authorities, with the assistance of the Higher Education and Research Ministry, may audit
each research and development program in respect of which a Research Tax Credit benefit has been
claimed and assess whether such program qualifies in their view for the Research Tax Credit benefit. The
French tax authorities may challenge our eligibility for, or our calculation of, certain tax reductions or
deductions in respect of our research and development activities (and therefore the amount of Research
Tax Credit claimed), or the accelerated reimbursement allowed for small- and medium-size businesses
and our credits may be reduced, which would have a negative impact on our revenue and future cash
flows. Furthermore, the French Parliament may decide to eliminate, or to reduce the scope or the rate of,
the Research Tax Credit benefit, either of which it could decide to do at any time. If we fail to receive
future Research Tax Credit amounts or if our calculations are challenged, even if we comply with the
current requirements in terms of documentation and eligibility of its expenditure, our business, prospects,
financial condition and results of operations could be adversely affected.
We may be unable to carry forward existing tax losses.
We have accumulated tax loss carry forwards of €287.7 million as of December 31, 2020. Applicable
French law provides that, for fiscal years ending after December 31, 2012, the use of these tax losses is
limited to €1.0 million, plus 50% of the portion of net earnings exceeding this amount. The unused
balance of the tax losses in application of such rule can be carried forward to future fiscal years, under the
same conditions and without time restriction. There can be no assurance that future changes to applicable
tax law and regulation will not eliminate or alter these or other provisions in a manner unfavorable to us,
which could have an adverse effect on our business, prospects, financial condition, cash flows or results
of operations.
Our business may be exposed to foreign exchange risks.
We incur some of our expenses, and derive certain of our revenues, in currencies other than the euro. In
particular, as we expand our operations and conduct additional clinical trials in the United States, we will
incur additional expenses in U.S. dollars. As a result, we are exposed to foreign currency exchange risk as
our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates.
We currently do not engage in hedging transactions to protect against uncertainty in future exchange rates
between particular foreign currencies and the euro. Therefore, an unfavorable change in the value of the
euro against the U.S. dollar could have a negative impact on our revenue and earnings growth. We cannot
45
predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may
adversely affect our financial condition, results of operations and cash flows. The ADSs being offered in
the U.S. offering are quoted in U.S. dollars on Nasdaq, while our ordinary shares trade in euro on
Euronext Paris. Our financial statements are prepared in euro. Therefore, fluctuations in the exchange rate
between the euro and the U.S. dollar will also affect, among other matters, the value of our ordinary
shares and ADSs.
Under our license and collaboration agreements with AstraZeneca, the payments we receive are in U.S.
dollars. In the future, we could generate part of our sales in the United States and part in Europe and could
therefore be subject to an unfavorable euro/dollar exchange rate. Therefore, for example, an increase in
the value of the euro against the U.S. dollar could be expected to have a negative impact on our revenue
and earnings growth as U.S. dollar revenue and earnings, if any, would be translated into euro at a
reduced value. We could also sign contracts denominated in other currencies, which would increase our
exposure to currency risk. In accordance with our business decisions, our exposure to this type of risk
could change depending on:
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the currencies in which we receive our revenues;
the currencies chosen when agreements are signed, such as licensing agreements, or co-
marketing or co- development agreements;
the location of clinical trials on product candidates; and
our policy for insurance cover.
At present, we have not put any specific hedging arrangements in place to address these risks. Should any
of these risks materialize, this could have a material adverse effect on our business, prospects, financial
condition and results of operations.
Changes to U.S. and non-U.S. tax laws could materially adversely affect our company.
We are unable to predict what tax law may be proposed or enacted in the future or what effect such
changes would have on our business, but such changes, to the extent they are brought into tax legislation,
regulations, policies or practices, could affect our effective tax rates in the future in countries where we
have operations and have an adverse effect on our overall tax rate in the future, along with increasing the
complexity, burden and cost of tax compliance. We urge our shareholders and holders of our ADSs to
consult with their legal and tax advisors with respect to the potential tax consequences of investing in or
holding our ordinary shares or ADSs.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions,
resulting in unanticipated costs, taxes or non-realization of expected benefits.
A tax authority may disagree with tax positions that we have taken, which could result in increased tax
liabilities. For example, the French tax authorities, the U.S. Internal Revenue Service or another tax
authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our
affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including
amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert
that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection,
often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if
successful, could increase our expected tax liability in one or more jurisdictions. A tax authority may take
the position that material income tax liabilities, interest and penalties are payable by us, in which case, we
expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly
and if we were unsuccessful in disputing the assessment, the result could increase our anticipated
effective tax rate.
46
Risks Related to Our Organization and Operations
There is a material weakness in our internal controls over financial reporting and if we are unable to
maintain effective internal controls over financial reporting, the accuracy and timeliness of our
financial reporting may be adversely affected, which could hurt our business, lessen investor
confidence.
We must maintain effective internal control processes over financial reporting in order to accurately
report our results of operations and financial condition on a timely basis. A company’s internal control
over financial reporting is a process designed by, or under the supervision of, a company’s principal
executive and principal financial officers, or persons performing similar functions, and effected by a
company’s executive board, management and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements in accordance with
generally accepted accounting principles.
As a public company listed in the United States, the Sarbanes-Oxley Act requires, among other things,
that we assess the effectiveness of our internal control over financial reporting as of the end of each fiscal
year, beginning with the end of the first full fiscal year following the completion of the Global Offering,
i.e., the end of fiscal year 2020. However, our independent registered public auditor will not be required
to attest to the effectiveness of our internal controls over financial reporting for as long as we are an EGC,
i.e. an “emerging growth company,” according to the Jumpstart Our Business Startups Act of 2012, or
JOBS Act, which may be up to five fiscal years following the date of the October 2019 public Global
Offering. An independent assessment of the effectiveness of our internal controls over financial reporting
could detect issues that our management’s assessment might not.
In this context, in order to comply with Section 404a of the Sarbanes-Oxley Act within the prescribed
timeframe, we have initiated a project to improve the documentation and the evaluation of our internal
control processes over financial information with the support of an expert company at the end of 2019. In
addition, in order to make the information system, on which the management and production of financial
information is based, more reliable, the plan aiming at transforming our information system initiated in
2019 took shape with the launch of our new Enterprise Resource Planning, or ERP, on August 1, 2020. In
parallel of the implementation of these structural changes, the decision to return the commercial rights of
Lumoxiti to AstraZeneca at the end of the year as well as personnel movements in the Finance team have
affected our operations in general and more specifically the operations for producing financial statements.
The Company's management carried out an evaluation of the effectiveness of our internal control at the
end of the year ended December 31, 2020. See "Item 15. Controls and Procedures."
Although we made significant improvement in terms of documentation and reliability of our internal
control system, the controls covering the risks related to manual entry and complex and unusual
transactions such as the return of the commercial rights of Lumoxiti to AstraZeneca and the revenue
recognition related to our collaboration and licensing agreement with AstraZeneca concerning
monalizumab did not prevent or detect a risk of material error. This deficiency, qualified as a material
weakness, resulted in a material error on revenue in the year ended December 31, 2020, which was
corrected prior to the publication of our financial statements.
Under standards established by the Public Company Accounting Oversight Board, a material weakness is
a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement in our annual or interim financial statements will not
be prevented or detected and corrected on a timely basis.
47
Although we have identified corrective actions, if we do not successfully remediate these issues or if we
fail to design and operate effective internal controls in the future, it could result in material misstatements
in our financial statements, result in the loss of investor confidence in the reliability of our financial
statements and subject us to regulatory scrutiny and sanctions, which in turn could harm the market value
of our ordinary shares and ADSs.
We may encounter difficulties in managing the Company development and support changes in our
strategy, which could disrupt our operations.
The opportunities taken, the decisions made, the successes and failures of our research and development
programs and our operations in general can have significant impacts on our workforce and the scope of
our operations.
The strong growth in our headcount over the last five years as well as the recent transformations of the
Company, in particular in connection with the acquisition in 2018 of Lumoxiti, our first commercial
product, have been accompanied by structural changes within the organization and its operating modes.
Such rapid changes may lead to a deterioration in working conditions and the leave of employees, which
could lead to a loss of knowledge and expertise, a decrease in the performance of our operations and
therefore a reduced level of achievement of our objectives.
Moreover, in December 2020, the decision of returning Lumoxiti commercial rights to AstraZeneca was
followed by an immediate reduction of our commercial operations and headcounts in the US. Although
the Company gained some experience in the late stage development and marketing and commercialization
of pharmaceutical products, such experience was short, and may not have resulted in a sufficient gain of
skills to anticipate and tackle the marketing and commercialization of our other drug candidates.
In addition, in order to support the development of the Company and changes in strategy, we must
continue to implement and improve our management, operational and financial systems, adapt our
facilities and recruit and train qualified personnel. Due to our limited financial resources, we may not be
able to effectively manage the development of our business, which could result in weaknesses in our
infrastructure, operational errors, loss of business opportunities, loss of employees and reduced
productivity of remaining employees. We may also experience difficulties in recruiting, training and
retaining additional qualified personnel, particularly in key positions. Added to this is the fact that we are
located in Marseille and are competing with other locations that potential recruits may find more
attractive.
If we were to acquire assets or companies, the success of such an acquisition would depend on our
capacity to carry out such acquisitions and to integrate such assets or companies into our existing
operations. The implementation of such a strategy could impose significant constraints, including:
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human resources: recruiting, integrating, training, managing, motivating and retaining a
growing number of employees;
financial and management system resources: identification and management of appropriate
financing and management of our financial reporting systems; and
infrastructure: expansion or transfer of our laboratories or the development of our information
technology system.
If we are unable to manage such changes or have difficulty integrating any acquisitions, it could have a
material adverse effect on our business, prospects, financial condition and results of operations.
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We would need to hire new employees and expand our use of service providers.
As of December 31, 2020, we had 245 employees. As our development plans and strategies develop, we
must need additional managerial, operational, marketing, financial and other personnel.
We currently rely, and for the foreseeable future will continue to rely, in part on certain independent
organizations, partners, advisors and consultants to provide certain services. There can be no assurance
that the services of these independent organizations, partners, advisors and consultants will continue to be
available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if
we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services
provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or
terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise
advance our business. There can be no assurance that we will be able to manage our existing consultants
or find other competent outside contractors and consultants on economically reasonable terms, if at all.
If we are not able to effectively expand our organization by hiring new employees and expanding our
groups of consultants and contractors, we may not be able to successfully implement the tasks necessary
to further develop and commercialize our product candidates and, accordingly, may not achieve our
research, development and commercialization goals.
We depend on qualified management personnel and our business could be harmed if we lose key
personnel and cannot attract new personnel.
Our ability to retain key persons in our organization and to recruit qualified personnel is crucial for our
success. In particular, our success depends heavily on its ability to retain key people in our organization,
including key scientific and medical personnel.
Should we be unable to retain the individuals who form our team of key managers and key scientific
advisors, it could have a material adverse effect on our business and development and could consequently
affect our business, prospects, financial condition and results of operations.
We will need to recruit qualified scientific and medical personnel to carry out our clinical trials and
expand into new areas that require specialized skills, such as regulatory matters, marketing and
manufacturing. We compete with other companies, research organizations and academic institutions in
recruiting and retaining highly qualified scientific, technical and management personnel. Competition for
such personnel is very intense in the biopharmaceutical field and there can be no assurance that we will be
successful in attracting or retaining such personnel and the failure to do so could harm our operations and
our growth prospects. Should any of these risks materialize, this could have a material adverse effect on
our business, prospects, financial condition and results of operations.
The recent global COVID-19 pandemic could adversely affect our business, financial condition and
results of operations.
An outbreak of a novel strain of coronavirus (i.e. COVID-19), which first emerged in the PRC in January
2020, has since spread to other parts of the world, including the United States and Europe. The Company
has set up a multifunctional team to monitor this crisis by addressing various issues as outlined below.
Despite our heightened vigilance, and given the evolving, unpredictable and unprecedented nature of this
situation, even if certain risks are identified, we may not be able to identify and control them all.
The progress of ongoing clinical trials, whether conducted by the Company or by its institutional or
industrial partners, may be impacted to an extent that is still uncertain in the coming months. Indeed, the
situation remains heterogeneous according to the countries, regions or even hospitals where these clinical
trials are conducted, in terms of the inclusion of new patients and the quality and completeness of the data
from these trials. Even if improvements have been observed, such as the resumption of the Phase I
49
clinical trial evaluating IPH5201 by AstraZeneca, the recruitment of new patients is still limited in some
hospitals that have suspended or slowed down their participation and involvement in clinical trials testing
our different drug candidates.
The Company has initiated a clinical development program in diseases related to COVID-19. The lack of
knowledge of the pathologies related to this virus leads to a higher risk in the development of new drug
candidates than the pathologies that the Company typically explores.
The situation could also compromise the manufacturing and supply chain for investigational drugs, drugs
used in our clinical trials as combination agents or comparators or marketed drugs. This could delay the
implementation of our clinical trials of our drug candidates. To date, no impact has been observed in the
supply chain of key materials, including investigational or marketed drugs, but the Company continues to
closely monitor the subcontractors involved in the various geographical areas where they operate or to
which these materials transit.
From a regulatory perspective, clinical trial authorization procedures and marketing authorization
procedures for drugs could also be delayed or the conditions for obtaining them modified.
The organization at our sites has been and is still adapting to the evolution of the situation, both
internationally and locally, and in compliance with the health and safety measures dictated by the
governments of the countries where the Company operates. During the first containment period, the
Company's on-site activity was focused on the opportunity to develop our drug candidates in indications
related to COVID-19, in order to limit the number of people on site and thus limit staff exposure. The
activities that can be carried out from home have been maintained in their entirety thanks to the IT
equipment already available within the Company. Since the end of this first containment period, research
and development activities have resumed in their entirety on site within a short timeframe. This
containment episode caused a delay of a few weeks, which was not significant given the nature of our
activities. On the other hand, business travel by our personnel has been and continues to be reduced to a
strict minimum, essentially impacting relations with healthcare personnel in hospitals, both for operations
related to the conduct of our clinical trials and operations related to the commercialization of Lumoxiti, as
discussed below. See section "—Any of our other product candidates, if approved and commercialized,
may fail to achieve market acceptance by physicians, patients, third-party payors or the medical
community to a degree that is necessary for commercial success."
From a financial standpoint:
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The delay in the development of our portfolio if the pandemic were to last or even increase could
impact our cash flow: we would have to finance our developments over a longer period of time,
without our cash consumption necessarily being much lower during the period in which our
activities are impacted as described above;
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Potential milestone payments would be delayed accordingly; and
• Any clinical developments that might have been an opportunity to go to market would also be
delayed accordingly.
In addition, the COVID-19 pandemic is having a significant and probably lasting impact on the global
economy and financial markets, particularly the equity markets. This has already had an immediate effect
on the fair value of the financial instruments in which we invest our cash, generating an unrealized loss
that could materialize in the event of an urgent need for cash. More broadly, the economic and financial
crisis may have an effect on our ability to finance ourselves in the markets.
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To date, we believe that the most immediate risks in terms of probability of occurrence and impact are
those related to clinical trials. The occurrence of some or all of the risks listed here could have an adverse
effect on the Company's operations and financial condition and prospects.
Our internal computerized systems, or those of our third-party contractors or consultants, may fail or
suffer security breaches and be subject to malicious intent or cyber-attack, which could result in a
material disruption of our product development programs.
We have implemented a security policy that are both intended to secure our data against impermissible
access and to preserve the integrity and confidentiality of the data. Despite the implementation of such
security measures, including a cybersecurity program, our internal computer systems and those of our
third-party contractors and consultants are vulnerable to damage from computer viruses, unauthorized
access, natural disasters, terrorism, war, telecommunication and electrical failures, and other sources.
Moreover, part of our information system is “cloud”-based and thus is not fully under our control.
In addition, our research and development facility and headquarters in Luminy, France is located in an
area that may be more susceptible to wildfires. If our facility or computer systems are damaged by fire
despite the fire prevention and data archiving measures we have put in place, we could suffer financial
losses and delays in our operations.
If such an event were to occur and cause interruptions in our operations, it could result in a material
disruption of our programs. For example, the loss of clinical trial data for our product candidates could
result in delays in our regulatory approval efforts and significantly increase our costs to recover or
reproduce the lost data. To the extent that any disruption or security breach results in a loss of or damage
to our data or applications or other data or applications relating to our technology or product candidates,
or inappropriate disclosure of confidential or proprietary information, we could incur liabilities, including
penalties under data privacy laws such as the GDPR and other regulations, and the further development of
our product candidates could be delayed. Should any of these risks materialize, this could have a material
adverse effect on our business, prospects, financial condition and results of operations.
Our Research and Development facility and Headquarters in Luminy, France are exposed to forest
fires
Our Research and Development facility and Headquarters in Luminy, France are exposed to forest fires.
Luminy is an area on the outskirts of Marseille, composed in part of undeveloped hills covered with
shrubs and pine trees. It is also located next to a natural park entirely covered by the same type of
Mediterranean vegetation. Summers are hot and dry and this type of vegetation is prone to forest fires.
Indeed, in September 2016, such a forest fire came relatively close to inhabited areas, including the
Company's facilities, where employees had to remain confined for several hours.
In order to prevent the risk of fire, fire prevention measures are implemented, such as pruning shrubs in
the surrounding green areas and implementing a maintenance plan for fire-fighting equipment. In
addition, computer data backup and archiving measures are implemented, allowing the regularly backed-
up data to be stored on the premises of a specialized service provider. In addition, rare biological material
used by the Company has been identified, duplicated and stored at other sites, at the premises of
specialized service providers.
However, these measures do not guarantee that another forest fire would not damage the Company's
premises in Luminy, which would result in financial losses, development delays of various durations or
even the suspension of the Company's activities.
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We may use hazardous chemicals and biological materials in our business and any claims relating to
improper handling, storage or disposal of these materials could be time-consuming and costly.
Our research and development processes involve the controlled use of hazardous materials, including
chemicals, biological and radioactive materials. We cannot eliminate the risk of accidental contamination
or discharge and any resultant injury from these materials. We also handle genetically recombined
material, genetically modified species and pathological biological samples. Consequently, in France and
in the jurisdictions where we conduct clinical trials, we are subject to environment and safety laws and
regulations governing the use, storage, handling, discharge and disposal of hazardous materials, including
chemical and biological products and radioactive materials. We impose preventive and protective
measures for the protection of our workforce and waste control management in accordance with
applicable laws, including part four of the French Labor Code, relating to occupational health and safety.
In France, we are required to comply with a number of national, regional and local legislative or
regulatory provisions regarding radiation and hazardous materials, including specific regulations
regarding the use, handling and storage of radioactive materials and the potential exposure of employees
to hazardous materials and radiation. We must also comply with French regulations concerning the use
and handling of genetically modified organisms, or GMOs, in confined spaces.
If we fail to comply with applicable regulations, we could be subject to fines and may have to suspend all
or part of our operations. Compliance with environmental, health and safety regulations involves
additional costs, and we may have to incur significant costs to comply with future laws and regulations in
relevant jurisdictions. Compliance with environmental laws and regulations could require us to purchase
equipment, modify facilities and undertake considerable expenses. We could be liable for any inadvertent
contamination, injury or damage, which could negatively affect its business, although we have subscribed
to an insurance policy covering certain risks inherent to its business.
Product liability and other lawsuits could divert our resources, result in substantial liabilities, reduce
the commercial potential of Lumoxiti or our product candidates and damage our reputation.
Given that we develop therapeutic products intended to be tested on humans and used to treat humans, the
risk that we may be sued on product liability claims is inherent in our business. Side effects of, or
manufacturing defects in, products that we develop could result in the deterioration of a patient’s
condition, injury or even death. For example, our liability could be sought after by patients participating
in the clinical trials in the context of the development of the therapeutic products tested and unexpected
side effects resulting from the administration of these products. Once a product is approved for sale and
commercialized, the likelihood of product liability lawsuits increases. Criminal or civil proceedings might
be filed against us by patients, regulatory authorities, biopharmaceutical companies and any other third-
party using or marketing our products. These actions could include claims resulting from acts by our
partners, licensees and subcontractors, over which we have little or no control. These lawsuits may divert
our management from pursuing our business strategy and may be costly to defend. In addition, if we are
held liable in any of these lawsuits, we may incur substantial liabilities, may be forced to limit or forgo
further commercialization of the affected products and may suffer damage to our reputation.
Although the clinical trial process is designed to identify and assess potential side effects, it is always
possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our
product candidates were to cause adverse side effects during clinical trials or after approval of the product
candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any
warnings that identify known potential adverse effects and patients who should not use Lumoxiti or our
product candidates.
We have obtained liability insurance coverage for each of our clinical trials in compliance with local
legislation and rules. In the United States, our aggregate insurance coverage for our ongoing clinical trials
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is €10.0 million in the aggregate. Our insurance coverage may not be sufficient to cover any expenses or
losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the
future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to
protect us against losses due to liability. On occasion, large judgments have been awarded in class action
lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or
other proceedings, even if resolved in our favor, could be substantial. A successful product liability claim,
or series of claims, brought against us could cause our share price to decline and, if judgments exceed our
insurance coverage, could decrease our cash and adversely affect our business.
To date, we have obtained product liability insurance with a coverage amount of €10 million per year.
Our product liability insurance will need to be adjusted in connection with the commercial sales of
Lumoxiti and our product candidates, and may be unavailable in meaningful amounts or at a reasonable
cost. If we are the subject of a successful product liability claim that exceeds the limits of any insurance
coverage we obtain, we would incur substantial charges that would adversely affect our earnings and
require the commitment of capital resources that might otherwise be available for the development and
commercial launch of our product programs. Should any of these risks materialize, this could have a
material adverse effect on our business, prospects, financial condition and results of operations.
Our employees may engage in misconduct or other improper activities, including violating applicable
regulatory standards and requirements, engaging in insider trading or violate the terms of their
confidentiality agreements, which could significantly harm our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could
include intentional failures to comply with legal requirements or the requirements of national authorities,
the EMA, FDA and other government regulators, provide accurate information to applicable government
authorities, comply with fraud and abuse and other healthcare laws and regulations in the United States,
Europe and elsewhere, report financial information or data accurately or disclose unauthorized activities
to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to
extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other
abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting,
marketing and promotion, sales commission, customer incentive programs and other business
arrangements. Employee misconduct could also involve the improper use of, including trading on,
information obtained in the course of clinical trials, which could result in regulatory sanctions and serious
harm to our reputation. We have a Code of Ethics that applies to all employees and consultants, and other
policies and charters, but it is not always possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent this activity may be ineffective in controlling unknown or
unmanaged risks or losses or in protecting us from governmental investigations or other actions or
lawsuits stemming from a failure to comply with these laws or regulations.
In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements
with our partners, employees, consultants, outside scientific collaborators and sponsored researchers, and
other advisors. These agreements may not effectively prevent disclosure of confidential information and
may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.
Costly and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our
competitive business position. Should any of these risks materialize, this could have a material adverse
effect on our business, prospects, financial condition and results of operations.
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We may acquire businesses or products in the future and we may not realize the benefits of such
acquisitions.
Although our current strategy involves continuing to grow our business internally, we may grow
externally through selective acquisitions of complementary products and technologies, or of companies
with such assets. If such acquisitions were to become necessary or attractive in the future, we may not be
able to identify appropriate targets or make acquisitions under satisfactory conditions, in particular,
satisfactory price conditions. In addition, we may be unable to obtain the financing for these acquisitions
under favorable conditions, and could be led to finance these acquisitions using cash that could be
allocated to other purposes in the context of existing operations. We may encounter numerous difficulties
in developing, manufacturing and marketing any new products resulting from an acquisition that delay or
prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that,
following any such acquisition, we will achieve the expected synergies to justify the transaction, which
could have a material adverse effect on our business, financial conditions, earnings and prospects.
Risks Related to Intellectual Property Rights
Our ability to compete may be adversely affected if we do not adequately obtain, maintain, protect and
enforce our intellectual property or proprietary rights, or if the scope of intellectual property protection
we obtain is not sufficiently broad.
Our success depends, in large part, on our ability to obtain and maintain patent and other intellectual
property protection in the United States and other countries with respect to Lumoxiti and our product
candidates. However, we may not be able to obtain, maintain or enforce our patents and other intellectual
property rights which could affect our ability to compete effectively. For example, we cannot guarantee:
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•
•
•
that we will file all necessary or desirable patent applications or that we will obtain the patents
that we have applied for and that are under review;
that we will be able to develop new patentable product candidates or technologies or obtain
patents to protect such new product candidates or technologies;
that we or our licensing or collaboration partners were the first to make the product candidates
or technologies covered by the issued patents or pending patent applications that we license or
own;
that we will be able to obtain sufficient rights to all necessary or desirable patents or other
intellectual property rights, whether at all or on reasonable terms;
that the scope of any issued patents that we own or license will be broad enough to protect
Lumoxiti or our product candidates or effectively prevent others from commercializing
competitive technologies and product candidates; and
that there is no risk of our owned and licensed patents being challenged, invalidated or
circumvented by a third-party.
The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to
file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable
cost or in a timely manner. For example, we do not intend to systematically file, maintain, prosecute and
defend patents on Lumoxiti and our product candidates in all countries. Consequently, we may not be able
to prevent third parties from exploiting products that are the same as or similar to our products and
product candidates in countries in which we do not obtain patent protection, or from selling or importing
such products in and into the countries in which we do have patent protection. It is also possible that we
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will fail to identify patentable aspects of our research and development output in time to obtain patent
protection. Although we enter into confidentiality agreements with parties who have access to
confidential or patentable aspects of our research and development output, such as our employees,
consultants, CROs, outside scientific collaborators, sponsored researchers, and other advisors, any of
these parties may breach the agreements and disclose such output before a patent application is filed,
thereby jeopardizing our ability to seek patent protection. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting such candidates
might expire before or shortly after such candidates are commercialized. As a result, our intellectual
property may not provide us with sufficient rights to exclude others from commercializing product
candidates similar or identical to ours. In addition, in some circumstances, we may not have the right to
control the preparation, filing, prosecution, maintenance, enforcement and defense of patents and patent
applications covering technology that we license to or from third parties. For example, pursuant to our
license agreement with AstraZeneca for monalizumab, AstraZeneca retains control of such activities for
certain patents that we license to it under the agreement and patents that arise under the collaboration. We
cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained,
enforced, and defended in a manner consistent with the best interest of our business. If any third-party
that controls our patents and patent applications fails to maintain our patents or such third-party loses
rights to our patents or patent applications, our rights to those patents and underlying technology may be
reduced or eliminated and our right to develop and commercialize our product candidates that are subject
to such rights could be adversely affected.
Moreover, some of our patents and patent applications are, and may in the future be, co-owned with third
parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such
patents or patent applications, such co-owners may be able to license their rights to other third parties,
including our competitors, and our competitors could market competing products and technology. We
may also need the cooperation of any such co-owners of our patents in order to enforce such patents
against third parties, and such cooperation may not be provided to us.
The coverage claimed in a patent application can be significantly reduced before the patent is issued, and
its scope can be reinterpreted after issuance. The issuance of a patent is not conclusive as to its
inventorship, scope, validity or enforceability. Even if patent applications we license or own currently or
in the future issue as patents, they may not issue in a form that will provide us with any meaningful
protection, prevent competitors or other third parties from circumventing our patents by developing
similar or alternative technologies or products in a non-infringing manner, or otherwise provide us with
any competitive advantage. Challenges from competitors or other third parties could reduce the scope of
our patents or render them invalid or unenforceable, which could limit our ability to stop others from
using or commercializing similar or identical technology and product candidates, or limit the duration of
the patent protection for Lumoxiti and our product candidates. The legal proceedings that we may then
have to enter into in order to enforce and defend our intellectual property could be very costly and could
distract our management and other personnel from their normal responsibilities, notably in the case of
lawsuits in the United States. The probability of disputes arising over our intellectual property will
increase progressively as patents are granted and as the value and appeal of the inventions protected by
these patents are confirmed. The occurrence of any of these events concerning any of our patents or
intellectual property rights could have a material adverse effect our business, prospects, financial
condition and results of operations. These risks are even higher for us, because of our limited financial
and human resources.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain,
involves complex legal and factual questions, and has been the subject of much litigation in recent years.
As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are
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highly uncertain. Our pending and future patent applications may not result in patents being issued which
protect our technology or product candidates or which effectively prevent others from commercializing
competitive technologies and product candidates. Furthermore, our owned and in-licensed patents may be
subject to a reservation of rights by one or more third parties. For example, the research resulting in
certain of our owned and licensed patent rights and technology was funded in part by the U.S.
government. As a result, the government may have certain rights, or march-in rights, to such patent rights
and technology. When new technologies are developed with government funding, the government
generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the
government to use the invention for non-commercial purposes. These rights may permit the government
to disclose our confidential information to third parties and to exercise march-in rights to use or allow
third parties to use our licensed technology. The government can exercise its march-in rights if it
determines that action is necessary because we fail to achieve practical application of the government-
funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of
federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may
be subject to certain requirements to manufacture products embodying such inventions in the United
States. Any exercise by the government of such rights could harm our competitive position, business,
financial condition, results of operations, and prospects.
Third parties may allege that we or our partners infringe, misappropriate or otherwise violate such
third parties’ intellectual property rights, which could prevent or delay our development efforts, stop us
from commercializing Lumoxiti or our product candidates, or increase the costs of commercializing
Lumoxiti or our product candidates.
Our commercial success depends on our ability and the ability of our partners to develop, manufacture,
market and sell Lumoxiti and our product candidates, and use our proprietary technologies, without
infringing, misappropriating or otherwise violating any intellectual property or proprietary rights of third
parties. The field of biopharmaceuticals involves significant patent and other intellectual property
litigation, which can be highly uncertain and involve complex legal and factual questions. The
interpretation and breadth of claims allowed in some patents covering biopharmaceutical compositions
also may be uncertain and difficult to determine.
We may not be aware of all third-party intellectual property rights potentially relating to our product
candidates. In general, in the United States patent applications are not published until 18 months after
filing or, in some cases, not at all. Therefore, we cannot be sure that we were the first to make the
inventions claimed in any owned or licensed patents or pending patent applications, or that we were the
first to file for patent protection for such inventions. If we were not the first to invent such inventions or
first to file any patent or patent application for such inventions, we may be unable to make use of such
inventions in connection with our products. We may need to obtain licenses from third parties (which
may not be available under commercially reasonable terms, or at all), delay the launch of product
candidates, or cease the production and sale of certain product candidates or develop alternative
technologies that are the subject of such patents or patent applications, any of which could have a material
adverse effect on our business, prospects, financial condition and results of operations. For example, third
parties may claim that lacutamab and other product candidates may use technology protected by their
patents. Although we believe that our current activities and our planned development of lacutamab does
not and will not infringe on such patents, which expire in the near term, third parties may disagree.
Third parties may allege that we or our partners infringe, misappropriate or otherwise violate any such
third-party’s patents or other intellectual property rights and assert infringement claims against us,
regardless of their merit. A court of competent jurisdiction could hold that these third-party patents are
valid, enforceable and infringed, which could materially and adversely affect our ability to commercialize
Lumoxiti and any product candidates we may develop and any other product candidates or technologies
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covered by the asserted third-party patents. In order to successfully challenge the validity of any such
U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a
high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent
claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such
U.S. patent. If we are found to infringe a third-party’s intellectual property rights, and we are unsuccessful
in demonstrating that such rights are invalid or unenforceable, we could be required to:
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bear the potentially significant costs of proceedings brought against us;
pay damages, which may include treble damages and attorney’s fees if we are found to have
willfully infringed a third-party’s patent rights;
cease developing, manufacturing and commercializing the infringing technology or product
candidates; and
acquire a license to such third-party intellectual property rights, which may not be available
on commercially reasonable terms, or at all, and may be non-exclusive thereby giving our
competitors and other third parties access to the same technologies licensed to us.
Even if resolved in our favor, litigation or other intellectual property proceedings may cause us to incur
significant expenses and could distract our management and other personnel from their normal
responsibilities. In addition, there could be public announcements of the results of hearings, motions or
other interim proceedings or developments and if securities analysts or investors perceive these results to
be negative, it could have a material adverse effect on the price of our ordinary shares or ADSs. We may
not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some
of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than
we can because of their greater financial resources and more mature and developed intellectual property
portfolios. Should one or more of the foregoing risks materialize, this could have a material adverse effect
on our reputation, business, prospects, financial condition and results of operations.
Our patents could be found invalid or unenforceable if challenged and we may not be able to protect
our intellectual property.
Our and our licensors’ patents and patent applications, if issued, may be challenged, invalidated or
circumvented by third parties. U.S. patents and patent applications may also be subject to interference
proceedings, re-examination proceedings, derivation proceedings, post-grant review or inter partes review
in the United States Patent and Trademark Office, or USPTO, challenging our or our licensors’ patent
rights. Foreign patents may be subject also to opposition or comparable proceedings in the corresponding
foreign patent office. For example, two of our European patents with claims directed to a class of anti-
NKG2A antibodies defined by characteristics shared with monalizumab have been challenged in
oppositions at the European Patent Office, or the EPO. Although the Opposition Division of the EPO
issued a decision that some claims directed to such class of anti-NKG2A antibodies are valid, the
Opposition Division’s decisions for both patents are currently under appeal. We have also received
notices that third parties filed oppositions challenging our in-licensed European patents directed to certain
of our CD39 technology, and these oppositions are currently pending.
In addition, we may allege that third parties infringe our or our licensors’ patents and the defendant could
counterclaim that such patents are invalid or unenforceable. In patent litigation in the United States,
defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity
challenge could be an alleged failure to meet any of several statutory requirements, including lack of
novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an
allegation that someone connected with prosecution of the patent withheld relevant information from the
USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of
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invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we
cannot be certain that there is no invalidating prior art, of which we or our licensing partners and the
patent examiner were unaware during prosecution.
Any such patent litigation or proceeding could result in the loss of our or our licensors’ patents, denial of
our or our licensors’ patent applications or loss or reduction in the scope of one or more of the claims of
such patents or patent applications. Accordingly, our or our licensors’ rights under any issued patents may
not provide us with sufficient protection against competitive product candidates or processes, we could
become unable to manufacture or commercialize Lumoxiti or our product candidates without infringing
third-party patent rights, and the duration of the patent protection of Lumoxiti or our product candidates
could be limited. Furthermore, because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our confidential information could be
compromised by disclosure during this type of litigation. Even if we are successful, such litigation or
proceedings may be costly and may distract our management and other personnel from their normal
responsibilities. Any of the foregoing could have a material adverse effect on our business, prospects,
financial condition and results of operations.
Obtaining and maintaining our patent protection depends on compliance with various procedural,
document submission, fee payment and other requirements imposed by government patent agencies,
and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/
or applications will be due to be paid to the USPTO, and various government patent agencies outside of
the United States over the lifetime of our owned and licensed patents and/or patent applications and any
patent rights we may own in the future. In certain circumstances, we may rely on our licensing partners to
pay these fees. The USPTO and various foreign patent agencies require compliance with several
procedural, documentary, fee payment and other similar provisions during the patent application process.
In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in
accordance with the applicable rules. There are situations, however, in which non-compliance can result
in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent
rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market
with similar or identical products or technology, which could have a material adverse effect on our
business, prospects, financial condition and results of operations.
Developments in patent law could have a negative impact on our business.
Changes in either the patent laws or interpretation of the patent laws could increase the uncertainties and
costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.
For example, from time to time, the U.S. Congress, the USPTO or similar foreign authorities may change
the standards of patentability and any such changes could have a negative impact on our business. In
addition, the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law
in September 2011, includes a number of significant changes to U.S. patent law. These changes include a
transition from a “first-to-invent” system to a “first-to-file” system, changes to the way issued patents are
challenged and changes to the way patent applications are disputed during the examination process such
as allowing third-party submission of prior art to the USPTO during patent prosecution. These changes
may favor larger and more established companies that have greater resources to devote to patent
application filing and prosecution. Under a first-to-file system, assuming that other requirements for
patentability are met, the first inventor to file a patent application generally will be entitled to the patent
on an invention regardless of whether another inventor made the invention earlier. The USPTO has
developed new regulations and procedures to govern the full implementation of the America Invents Act,
and many of the substantive changes to patent law associated with the America Invents Act, and, in
particular, the first-to-file provisions, became effective in March 2013. Substantive changes to patent law
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associated with the America Invents Act, or any subsequent U.S. legislation regarding patents, may affect
our ability to obtain patents, and if obtained, to enforce or defend them. Accordingly, it is not clear what,
if any, impact the America Invents Act will have on the cost of prosecuting our U.S. patent applications,
our ability to obtain U.S. patents based on our discoveries and our ability to enforce or defend any patents
that may issue from our patent applications, all of which could have a material adverse effect on our
business.
In addition, changes to or different interpretations of patent laws in the United States and other countries
may permit others to use our or our partners’ discoveries or to develop and commercialize our technology
and product candidates without providing any compensation to us, or may limit the number of patents or
claims we can obtain. The patent positions of companies in the biotechnology and pharmaceutical market
are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of U.S. patent
protection available in certain circumstances and weakened the rights of patent owners in certain
situations. This combination of events has created uncertainty with respect to the validity and
enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal
courts, and the USPTO, as well as similar bodies in other countries, the laws and regulations governing
patents could change in unpredictable ways that could have a material adverse effect on our existing
patent portfolio and our ability to protect and enforce our intellectual property in the future, which could
have a material adverse effect on our business, prospects, financial condition and results of operations.
If we do not obtain protection under the Hatch-Waxman Amendments and similar non-U.S. legislation
for extending the term of patents covering Lumoxiti and each of our product candidates, our business
may be materially harmed.
Depending upon the timing, duration and conditions of FDA marketing authorization of Lumoxiti and our
product candidates, one or more of our U.S. patents may be eligible for limited patent term extension
under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman
Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a
patent term extension of up to five years for a patent covering an approved product as compensation for
effective patent term lost during product development and the FDA regulatory review process. A patent
term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of
product approval, only one patent may be extended and only those claims covering the approved product,
a method for using it or a method for manufacturing it may be extended. However, we may not receive an
extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant
patents, fail to exercise due diligence during the testing phase or regulatory review process or otherwise
fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we
request. If we are unable to obtain patent term extension or the term of any such extension is less than we
request, the period during which we can enforce our patent rights for that product will be shortened and
our competitors may obtain approval to market competing products sooner. As a result, our revenue from
Lumoxiti or an applicable product could be reduced, possibly materially, which could have a material
adverse effect on our business, prospects, financial condition and results of operations.
We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and
we may not be able to adequately enforce our intellectual property rights in all jurisdictions where we
seek intellectual property protection.
Filing, maintaining, prosecuting and defending patents on Lumoxiti and our product candidates in all
countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual
property rights in some countries outside the United States could be less extensive than those in the
United States. Consequently, we may not be able to prevent third parties from using our product
candidates or technologies in all countries outside the United States, or from selling or importing products
made using our product candidates or technologies in and into the United States or other jurisdictions.
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Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent
protection to develop their own products and further, may export otherwise infringing products to
territories where we have patent protection, and enforcement is not as strong as that in the United States.
These products may compete with our products, and our patents or other intellectual property rights may
not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents
in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or
sufficient to prevent third parties from so competing.
In addition, the laws of some foreign countries do not protect intellectual property rights to the same
extent as the federal and state laws in the United States. Many companies have encountered significant
problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal
systems of some countries, particularly developing countries, do not favor the enforcement of patents and
other intellectual property protection, especially those relating to biopharmaceuticals or biotechnologies.
This could make it difficult for us to stop the infringement of our patents, if obtained, or the
misappropriation or other violation of our other intellectual property rights. For example, many foreign
countries have compulsory licensing laws under which a patent owner must grant licenses to third parties.
In addition, many countries limit the enforceability of patents against third parties, including government
agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent
protection must ultimately be sought on a country-by-country basis, which is an expensive and time-
consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in
certain countries, and we will not have the benefit of patent protection in such countries.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert
our efforts and attention from other aspects of our business, could put our patents at risk of being
invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could
provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and
the damages or other remedies awarded, if any, may not be commercially meaningful. In addition,
changes in the law and legal decisions by courts in the United States and other countries may affect our
ability to obtain adequate protection for our technology and the enforcement of our intellectual property.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to
obtain a significant commercial advantage from the intellectual property that we develop or license.
Should any of these risks materialize, this could have a material adverse effect on our business, prospects,
financial condition and results of operations.
Third parties may assert ownership or commercial rights to products, product candidates or
technologies that we develop.
Third parties have made, and may in the future make, claims challenging the inventorship or ownership of
our intellectual property, which may result in the imposition of additional obligations on us, such as
development, royalty and milestone payments. We have written agreements with partners or other third
parties that provide for the ownership of intellectual property arising from our collaborations and our
other work with such third parties. These agreements provide that we must negotiate certain commercial
rights with partners and other third parties with respect to joint inventions or inventions made by our
partners or such third parties that arise from the results of the collaboration or other work with such third
parties. In some instances, there may not be adequate written provisions to address clearly the resolution
of intellectual property rights that may arise under our agreements. For example, Orega Biotech SAS, or
Orega Biotech, has made claims of joint ownership of certain patents relating to IPH5201, and we and
Orega Biotech have agreed to resolve those claims in an arbitration proceeding. If we cannot successfully
negotiate sufficient ownership and commercial rights to the inventions that result from our use of a third-
party’s materials where required, or if disputes otherwise arise with respect to the intellectual property
developed with the use of a third-party’s samples, we may be limited in our ability to capitalize on the
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market potential of these inventions. In addition, we may face claims by third parties that our agreements
with employees, contractors, or consultants obligating them to assign intellectual property to us are
ineffective, or in conflict with prior or competing contractual obligations of assignment, which could
result in ownership disputes regarding intellectual property we have developed or will develop and
interfere with our ability to capture the commercial value of such inventions. We also may be
unsuccessful in executing assignment agreements with each party who, in fact, conceives or develops
intellectual property that we regard as our own, or such agreements might not be self-executing or might
be breached.
Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be
precluded from using certain intellectual property, may lose our exclusive rights in such intellectual
property or may be required to acquire a license to such intellectual property, which may not be available
on commercially reasonable terms or at all. Any of the foregoing could have a material adverse impact on
our business.
If we fail to comply with our obligations under license or technology agreements with third parties, we
could lose license rights that are critical to our business, and we may not be successful in obtaining
necessary intellectual property rights.
We license intellectual property from third parties that is critical to our business through license
agreements, including but not limited to licenses related to the manufacture, composition, use and sale of
our product candidates, and in the future we may enter into additional agreements that provide us with
licenses to valuable intellectual property or technology. For example, we depend on our license agreement
with AstraZeneca for the commercialization of Lumoxiti and our license agreement with Novo Nordisk
A/S for the development and commercialization of monalizumab. Our license agreements impose various
obligations on us, which may include development, royalty and milestone payments. If we fail to comply
with any of these obligations, our licensors may have the right to terminate the agreements. If our license
agreements with AstraZeneca or Novo Nordisk A/S or any other current or future licensors terminate, we
would lose valuable rights and may be required to cease our development, manufacture or
commercialization of Lumoxiti or our product candidates, including monalizumab. In addition, our
business would suffer if our licensors fail to abide by the terms of the agreements, if our licensors fail to
prevent infringement by third parties, or if the licensed patents or other rights are found to be invalid or
unenforceable. Should any of these risks materialize, this could have a material adverse effect on our
business, prospects, financial condition and results of operations.
In addition, disputes may arise regarding intellectual property subject to a license agreement, including:
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the scope of rights granted under the license agreement and other interpretation-related issues;
the extent to which our technology and processes infringe on intellectual property of the
counterparty that is not subject to the license agreement;
our diligence obligations under the license agreement and what activities satisfy those
diligence obligations;
the inventorship or ownership of inventions and know-how resulting from the joint creation or
use of intellectual property by our counterparties and us; and
the priority of invention of patented technology.
The agreements under which we currently license intellectual property from third parties are complex, and
certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of
any contract dispute that may arise could narrow what we believe to be the scope of our rights to the
relevant intellectual property, or modify in a manner adverse to us what we believe to be our or our
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counterpart’s financial or other obligations under the relevant agreement, any of which could have
material adverse effect on our business, financial condition, results of operations and prospects. If
disputes over intellectual property that we have licensed prevent or impair our ability to maintain our
current license agreement on acceptable terms, we may be unable to unsuccessfully develop and
commercialize the affected product candidates.
Additionally, the growth of our business may depend, in part, on our ability to acquire, in-license or use
proprietary rights held by third parties. We may be unable to acquire or in-license intellectual property
rights from third parties that we identify as necessary for our product candidates on reasonable terms or at
all. The licensing or acquisition of third-party intellectual property rights is a competitive area, and
several more established companies may pursue strategies to license or acquire third-party intellectual
property rights that we may consider attractive. These established companies may have a competitive
advantage over us due to their size, capital resources, and greater clinical development and
commercialization capabilities. In addition, companies that perceive us to be a competitor may be
unwilling to assign or license rights to us. We also may be unable to license or acquire third-party
intellectual property rights on terms that would allow us to make an appropriate return on our investment.
As part of our business, we collaborate with non-profit and academic institutions to accelerate our
preclinical research or development under agreements with these institutions. Typically, these institutions
provide us with an option to negotiate a license to any of the institution’s or its employees’ rights in
technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a
license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so,
the institution may offer the intellectual property rights to other parties, potentially blocking our ability to
pursue our applicable development or commercialization program. If we are unable to successfully obtain
rights to required third-party intellectual property rights or maintain the existing intellectual property
rights we have, we may have to abandon the development and commercialization of the relevant program
and our business, financial conditions, results of operations and prospects could be adversely affected.
Third parties may assert that our employees, consultants or independent contractors have wrongfully
used or disclosed confidential information or misappropriated trade secrets of their current or former
employers.
We employ individuals who are currently, or were previously, employed at universities or other
biotechnology or pharmaceutical companies, including our competitors or potential competitors.
Although we try to ensure that our employees, consultants and independent contractors do not use the
proprietary information or know-how of others in their work for us, and no such claims against us are
currently pending, we may be subject to claims that we or our employees, consultants or independent
contractors have used or disclosed intellectual property, including trade secrets or other proprietary
information, of any such individual’s current or former employer or other third parties. Litigation may be
necessary to defend against these claims. If we fail in defending any such claims, in addition to paying
monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are
successful in defending against such claims, litigation could result in substantial costs and be a distraction
to our management and other employees. Should any of these risks materialize, this could have a material
adverse effect on our business, prospects, financial condition and results of operations.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive
position could be materially harmed.
In addition to patent protection, because we operate in the highly technical field of biopharmaceutical
drug development, we rely in part on trade secret protection in order to protect our proprietary technology
and processes. However, trade secrets are difficult to protect. We seek to protect our trade secrets, in part,
by entering into confidentiality agreements with our employees, consultants, CROs, outside scientific
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collaborators, sponsored researchers, and other advisors. These agreements generally require that the
other party keep confidential and not disclose to third parties all confidential information developed by
such party or made known to such party by us during the course of such party’s relationship with us.
However, we cannot guarantee that we have entered into such agreements with each party that may have
or have had access to our trade secrets and confidential information and these agreements may be
breached, and we may not have adequate remedies for any breach.
In addition to contractual measures, we try to protect the confidential nature of our proprietary
information using physical and technological security measures. Such measures may not, for example, in
the case of misappropriation of a trade secret by an employee or third-party with authorized access,
provide adequate protection for our proprietary information. Our security measures may not prevent an
employee or consultant from misappropriating our trade secrets and providing them to a competitor, and
recourse we take against such misconduct may not provide an adequate remedy to protect our interests
fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult,
expensive, and time-consuming, and the outcome is unpredictable. In addition, courts outside the United
States may be less willing to protect trade secrets. Moreover, trade secrets may be independently
developed by others in a manner that could prevent legal recourse by us. If any of our confidential or
proprietary information, such as our trade secrets, were to be disclosed to or misappropriated by a third-
party, or if any such information was independently developed by a third-party, our competitive position
could be materially harmed.
Our trade and technical secrets include:
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conducting research and development work in our field;
certain scientific knowledge generated by the work we carry out;
certain information relating to the product candidates we are currently developing; and
certain information relating to the agreements signed between us and third parties.
The unauthorized disclosure or misappropriation of certain of these secrets could allow third parties to
offer products or services to compete with ours or generally have a material adverse effect on our
business.
The structures put in place to protect our trade and technical secrets do not constitute a guarantee that one
or more of our trade and technical secrets will not be disclosed or misappropriated. The agreements or
other arrangements to protect our trade secrets may fail to provide the protection sought, or are breached,
or that our trade secrets are disclosed to, or developed independently by, our competitors. Should any of
these risks materialize, this could have a material adverse effect on our business, prospects, financial
condition and results of operations.
Unauthorized use of our trademarks may generate confusion and result in costs and delays to the
detriment of our marketing efforts.
Our trademarks are a key component of our identity and our products. Although the key components of
our trademarks have been registered, notably in France and the United States, other companies in the
pharmaceutical sector might use or attempt to use similar trademarks or components of our trademarks,
and thereby create confusion in the minds of third parties. Our registered trademarks may be challenged,
infringed, circumvented or declared generic or determined to be infringing on other marks. In addition,
there could be potential trademark infringement claims brought by owners of other trademarks that
incorporate variations of our registered or unregistered trademarks.
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In the event we develop trademarks for products that conflict with intellectual property rights of third
parties, we would then have to redesign or rename our products in order to avoid encroaching on the
intellectual property rights of third parties. This could prove to be impossible or costly in terms of time
and financial resources and could be detrimental to our marketing efforts. Should any of these risks
materialize, this could have a material adverse effect on our business, prospects, financial condition and
results of operations.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because
intellectual property rights have limitations and may not adequately protect our business or permit us to
maintain our competitive advantage. For example:
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others may be able to make products that are the same as or similar to Lumoxiti and our
product candidates or utilize similar technology but that are not covered by the claims of the
patents that we license or may own in the future;
we, or our license partners or current or future collaborators, might not have been the first to
make the inventions covered by the issued patent or pending patent application that we license
or may own in the future;
we, or our license partners or current or future collaborators, might not have been the first to
file patent applications covering certain of our or their inventions;
others may independently develop similar or alternative technologies or duplicate any of our
technologies without infringing our owned or licensed intellectual property rights;
it is possible that our owned or licensed pending patent applications will not lead to issued
patents;
issued patents that we hold rights to may be held invalid or unenforceable, including as a result
of legal challenges by our competitors;
our competitors might conduct research and development activities in countries where we do
not have patent rights and then use the information learned from such activities to develop
competitive products for sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable;
the patents of others may harm our business; and
we may choose not to file a patent in order to maintain certain trade secrets or know-how, and
a third-party may subsequently file a patent covering such intellectual property.
Should any of these events occur, they could have a material adverse effect on our business, financial
condition, results of operations, and prospects.
Risks Related to Ownership of Our Ordinary Shares and the ADSs
The trading price of our equity securities may be volatile, and purchasers of our ordinary shares or
ADSs could incur substantial losses.
It is likely that the price of our ordinary shares and ADSs will be significantly affected by events such as
announcements regarding scientific and clinical results concerning product candidates currently being
developed by us, our collaboration partners or our main competitors, changes in market conditions related
to our sector of activity, announcements of new contracts, technological innovations and collaborations
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by us or our main competitors, developments concerning intellectual property rights, as well as the
development, regulatory approval and commercialization of new products by us or our main competitors
and changes in our financial results.
Equity markets are subject to considerable price fluctuations, and often, these movements do not reflect
the operational and financial performance of the listed companies concerned. In particular, biotechnology
companies’ share prices have been highly volatile and may continue to be highly volatile in the future. As
we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect
our industry. Fluctuations in the stock market as well as the macro-economic environment could
significantly affect the price of our ordinary shares. As a result of this volatility, investors may not be able
to sell their ordinary shares or ADSs at or above the price originally paid for the security. The market
price for our ordinary shares and ADSs may be influenced by many factors, including:
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actual or anticipated fluctuations in our financial condition and operating results;
actual or anticipated changes in our growth rate relative to our competitors;
competition from existing products or new products that may emerge;
announcements by us or our competitors of significant acquisitions, strategic partnerships,
joint ventures, collaborations or capital commitments;
adverse results of delays in our or any of our competitors’ preclinical studies or clinical trials;
adverse regulatory decisions, including failure to receive regulatory approval for any of our
product candidates;
the termination of a strategic alliance or the inability to establish additional strategic alliances;
failure to meet or exceed financial estimates and projections of the investment community or
that we provide to the public;
issuance of new or updated research or reports by securities analysts;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
ordinary share and ADS price and volume fluctuations attributable to inconsistent trading
volume levels of our ordinary shares and ADSs;
price and volume fluctuations in trading of our ordinary shares on Euronext Paris;
additions or departures of key management or scientific personnel;
disputes or other developments related to proprietary rights, including patents, litigation
matters and our ability to obtain patent and other intellectual property protection for our
technologies;
changes to coverage policies or reimbursement levels by commercial third-party payors and
government payors and any announcements relating to coverage policies or reimbursement
levels;
announcement or expectation of additional debt or equity financing efforts;
sales of our ordinary shares or ADSs by us, our insiders or our other shareholders; and
general economic and market conditions.
These and other market and industry factors may cause the market price and demand for our ordinary
shares and ADSs to fluctuate substantially, regardless of our actual operating performance, which may
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limit or prevent investors from readily selling their ordinary shares or ADSs and may otherwise
negatively affect the liquidity of the trading market for the ordinary shares and ADSs.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research
about our business, the price of the ordinary shares or ADSs and their trading volume could decline.
The trading market for the ADSs and ordinary shares depends in part on the research and reports that
securities or industry analysts publish about us or our business. As a public company in France since
2006, our equity securities are currently subject to coverage by a number of analysts. If fewer securities or
industry analysts cover our company, the trading price for the ADSs and ordinary shares would be
negatively impacted. If one or more of the analysts who covers us downgrades our equity securities or
publishes incorrect or unfavorable research about our business, the price of the ordinary shares and ADSs
would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish
reports on us regularly, or downgrades our securities, demand for the ordinary shares and ADSs could
decrease, which could cause the price of the ordinary shares and ADSs or their trading volume to decline.
We do not currently intend to pay dividends on our securities and, consequently, your ability to achieve
a return on your investment will depend on appreciation in the price of the ordinary shares and ADSs.
In addition, French law (including any temporary measures taken in response to COVID-19 pandemic)
may limit the amount of dividends we are able to distribute.
We have never declared or paid any cash dividends on our ordinary shares and do not currently intend to
do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our
growth. Therefore, the holders of our ordinary shares and ADSs are not likely to receive any dividends for
the foreseeable future and the success of an investment in our ordinary shares and ADSs depends upon
any future appreciation in value. Consequently, investors may need to sell all or part of their holdings of
the ordinary shares or ADSs after price appreciation, which may never occur, as the only way to realize
any future gains on their investment. There is no guarantee that the ordinary shares or ADSs will
appreciate in value or even maintain the price at which our shareholders have purchased them.
Further, under French law, the determination of whether we have been sufficiently profitable to pay
dividends is made on the basis of our statutory financial statements prepared and presented in accordance
with accounting standards applicable in France. Moreover, pursuant to French law, we must allocate 5%
of our unconsolidated net profit for each year to our legal reserve fund before dividends, should we
propose to declare any, may be paid for that year, until the amount in the legal reserve is equal to 10% of
the aggregate nominal value of our issued and outstanding share capital. In addition, payment of
dividends may subject us to additional taxes under French law. Therefore, we may be more restricted in
our ability to declare dividends than companies that are not incorporated in France. See “Description of
Share Capital—Key Provisions of Our Bylaws and French Law Affecting Our Ordinary Shares” for
further details on the limitations on our ability to declare and pay dividends and the taxes that may
become payable by us if we elect to pay a dividend.
In addition, exchange rate fluctuations may affect the amount of euro that we are able to distribute, and
the amount in U.S. dollars that our shareholders receive upon the payment of cash dividends or other
distributions we declare and pay in euro, if any. These factors could harm the value of the ADSs, and, in
turn, the U.S. dollar proceeds that holders receive from the sale of the ADSs.
Future sales, or the possibility of future sales, of a substantial number of our ADSs or ordinary shares
could adversely affect the market price of our ADSs and ordinary shares.
Future sales of a substantial number of our ADSs or ordinary shares, or the perception that such sales will
occur, could cause a decline in the market price of our ADSs and/or ordinary shares. Sales in the United
States of our ADSs and ordinary shares held by our directors, officers and affiliated shareholders or ADS
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holders are subject to restrictions. If these shareholders or ADS holders sell substantial amounts of
ordinary shares or ADSs in the public market, or the market perceives that such sales may occur, the
market price of our ADSs or ordinary shares and our ability to raise capital through an issue of equity
securities in the future could be adversely affected.
The dual listing of our ordinary shares and the ADSs may adversely affect the liquidity and value of
the ADSs.
Our ADSs are listed on Nasdaq, and our ordinary shares are admitted to trading on Euronext Paris.
Trading of the ADSs or ordinary shares in these markets take place in different currencies (U.S. dollars on
Nasdaq and euro on Euronext Paris), and at different times (resulting from different time zones, different
trading days and different public holidays in the United States and France). The trading prices of our
ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price
of our ordinary shares on Euronext Paris could cause a decrease in the trading price of the ADSs on
Nasdaq. Investors could seek to sell or buy our ordinary shares to take advantage of any price differences
between the markets through a practice referred to as arbitrage. Any arbitrage activity could create
unexpected volatility in both our share prices on one exchange, and the ordinary shares available for
trading on the other exchange. In addition, holders of ADSs are not immediately able to surrender their
ADSs and withdraw the underlying ordinary shares for trading on the other market without effecting
necessary procedures with the depositary. This could result in time delays and additional cost for holders
of ADSs. We cannot predict the effect of this dual listing on the value of our ordinary shares and the
ADSs. However, the dual listing of our ordinary shares and the ADSs may reduce the liquidity of these
securities in one or both markets and may adversely affect the development of an active trading market
for the ADSs in the United States.
The rights of shareholders in companies subject to French corporate law differ in material respects
from the rights of shareholders of corporations incorporated in the United States.
We are a French company with limited liability. Our corporate affairs are governed by our bylaws and by
the laws governing companies incorporated in France. The rights of shareholders and the responsibilities
of members of our Executive Board and of our Supervisory Board are in many ways different from the
rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. For
example, in the performance of its duties, our Executive Board is required by French law to consider the
interests of our company, its shareholders, its employees and other stakeholders, rather than solely our
shareholders and/or creditors. It is possible that some of these parties have interests that are different
from, or in addition to, your interests as a shareholder or holder of ADSs. See “Item 16G.—Corporate
Governance.”
U.S. investors may have difficulty enforcing civil liabilities against our company and members of the
Executive Board and the Supervisory Board.
Most of the members of our Executive Board and Supervisory Board and the experts named therein are
non-residents of the United States, and all or a substantial portion of our assets and the assets of such
persons are located outside the United States. As a result, it may not be possible to serve process on such
persons or us in the United States or to enforce judgments obtained in U.S. courts against them or us
based on civil liability provisions of the securities laws of the United States. Additionally, it may be
difficult to assert U.S. securities law claims in actions originally instituted outside of the United States.
Foreign courts may refuse to hear a U.S. securities law claim because foreign courts may not be the most
appropriate forums in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may
determine that the law of the jurisdiction in which the foreign court resides, and not U.S. law, is
applicable to the claim. Further, if U.S. law is found to be applicable, the content of applicable U.S. law
must be proved as a fact, which can be a time-consuming and costly process, and certain matters of
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procedure would still be governed by the law of the jurisdiction in which the foreign court resides. In
particular, there is some doubt as to whether French courts would recognize and enforce certain civil
liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon these civil
liability provisions. In addition, awards of punitive damages in actions brought in the United States or
elsewhere may be unenforceable in France. An award for monetary damages under the U.S. securities
laws would be considered punitive if it does not seek to compensate the claimant for loss or damage
suffered but is intended to punish the defendant. French law provides that a shareholder, or a group of
shareholders, may initiate a legal action to seek indemnification from the directors of a corporation in the
corporation’s interest if it fails to bring such legal action itself. If so, any damages awarded by the court
are paid to the corporation and any legal fees relating to such action may be borne by the relevant
shareholder or the group of shareholders. The enforceability of any judgment in France will depend on the
particular facts of the case as well as the laws and treaties in effect at the time. The United States and
France do not currently have a treaty providing for recognition and enforcement of judgments, other than
arbitration awards, in civil and commercial matters.
Our bylaws and French corporate law contain provisions that may delay or discourage a takeover
attempt.
Provisions contained in our bylaws and French corporate law could make it more difficult for a third-
party to acquire us, even if doing so might be beneficial to our shareholders. In addition, provisions of our
bylaws impose various procedural and other requirements, which could make it more difficult for
shareholders to effect certain corporate actions. These provisions include the following:
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under French law, the owner of 90% of the share capital or voting rights of a public company
listed on a regulated market in a Member State of the European Union or in a state party to the
EEA Agreement, including from the main French stock exchange, has the right to force out
minority shareholders following a tender offer made to all shareholders;
under French law, a non-resident of France, as well as any French entity controlled by non-
residents of France, may have to file a declaration for statistical purposes with the Bank of
France (Banque de France) within 20 working days following the date of certain direct foreign
investments in us, including any purchase of our ADSs. In particular, such filings are required
in connection with investments exceeding €15,000,000 that lead to the acquisition of at least
10% of our share capital or voting rights or cross such 10% threshold;
under French law, certain investments in a French company relating to certain strategic
industries by individuals or entities not residents in a Member State of the EU are subject to
prior authorization of the Ministry of Economy;
a merger (i.e., in a French law context, a share for share exchange following which our
company would be dissolved into the acquiring entity and our shareholders would become
shareholders of the acquiring entity) of our company into a company incorporated in the
European Union would require the approval of our Executive Board, as well as a two-thirds
majority of the votes held by the shareholders present, represented by proxy or voting by mail
at the relevant meeting;
a merger of our company into a company incorporated outside of the European Union would
require 100% of our shareholders to approve it;
under French law, a cash merger is treated as a share purchase and would require the consent
of each participating shareholder;
our shareholders may in the future grant our Executive Board broad authorizations to increase
our share capital or to issue additional ordinary shares or other securities (for example,
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warrants) to our shareholders, the public or qualified investors, including as a possible defense
following the launching of a tender offer for our ordinary shares;
our shareholders have preferential subscription rights on a pro rata basis on the issuance by us
of any additional securities for cash or a set-off of cash debts, which rights may only be
waived by the extraordinary general meeting (by a two-thirds majority vote) of our
shareholders or on an individual basis by each shareholder;
our Supervisory Board appoints the members of the Executive Board and shall fill any
vacancy within two months;
our Supervisory Board has the right to appoint members of the Supervisory Board to fill a
vacancy created by the resignation or death of a member of the Supervisory Board for the
remaining duration of such member’s term of office, and subject to the approval by the
shareholders of such appointment at the next shareholders’ meeting, which prevents
shareholders from having the sole right to fill vacancies on our Supervisory Board;
our Executive Board can be convened by the chairman of the Executive Board or other
members of the Executive Board delegated for this purpose;
our Supervisory Board can be convened by the chairman or the vice-chairman of the
Supervisory Board. A member of the Executive Board or one-third of the members of the
Supervisory Board may send a written request to the chairman to convene the Supervisory
Board. If the chairman does not convene the Supervisory Board 15 days following the receipt
of such request, the authors of the request may themselves convene the Supervisory Board;
our Supervisory Board meetings can only be regularly held if at least half of its members
attend either physically or by way of videoconference or teleconference enabling the
members’ identification and ensuring their effective participation in the Supervisory Board’s
decisions;
approval of at least a majority of the votes held by shareholders present, represented by a
proxy, or voting by mail at the relevant ordinary shareholders’ general meeting is required to
remove members of the Executive Board and/or members of the Supervisory Board with or
without cause;
the crossing of certain ownership thresholds has to be disclosed and can impose certain
obligations;
advance notice is required for nominations to the Supervisory Board or for proposing matters
to be acted upon at a shareholders’ meeting, except that a vote to remove and replace a
member of the Supervisory Board can be proposed at any shareholders’ meeting without
notice;
transfers of shares shall comply with applicable insider trading rules and regulations, and in
particular with the Market Abuse Regulation 596/2014 of April 16, 2014, as amended; and
pursuant to French law, our bylaws, including the sections relating to the number of members
of the Executive and Supervisory Boards, and election and removal of members of the
Executive and Supervisory Boards from office may only be modified by a resolution adopted
by two-thirds of the votes of our shareholders present, represented by a proxy or voting by
mail at the meeting.
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Purchasers of ADSs in the U.S. offering are not directly holding our ordinary shares.
A holder of ADSs is not treated as one of our shareholders and does not have direct shareholder rights.
French law governs our shareholder rights. The depositary, through the custodian or the custodian’s
nominee, is the holder of the ordinary shares underlying ADSs held by purchasers of ADSs in the U.S.
offering. Purchasers of ADSs in the U.S. offering have ADS holder rights. The deposit agreement among
us, the depositary and purchasers of ADSs in the U.S. offering, as an ADS holder, and all other persons
directly and indirectly holding ADSs, sets out ADS holder rights, as well as the rights and obligations of
us and the depositary.
Your right as a holder of ADSs to participate in any future preferential subscription rights offering or
to elect to receive dividends in shares may be limited, which may cause dilution to your holdings.
According to French law, if we issue additional securities for cash, current shareholders will have
preferential subscription rights for these securities on a pro rata basis unless they waive those rights at an
extraordinary meeting of our shareholders (by a two-thirds majority vote) or individually by each
shareholder. However, our ADS holders in the United States will not be entitled to exercise or sell such
rights unless we register the rights and the securities to which the rights relate under the Securities Act or
an exemption from the registration requirements is available. In addition, the deposit agreement provides
that the depositary will not make rights available to you unless the distribution to ADS holders of both the
rights and any related securities are either registered under the Securities Act or exempted from
registration under the Securities Act. Further, if we offer holders of our ordinary shares the option to
receive dividends in either cash or shares, under the deposit agreement the depositary may require
satisfactory assurances from us that extending the offer to holders of ADSs does not require registration
of any securities under the Securities Act before making the option available to holders of ADSs. We are
under no obligation to file a registration statement with respect to any such rights or securities or to
endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to
establish an exemption from registration under the Securities Act. Accordingly, ADS holders may be
unable to participate in our rights offerings or to elect to receive dividends in shares and may experience
dilution in their holdings. In addition, if the depositary is unable to sell rights that are not exercised or not
distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which
case you will receive no value for these rights.
You may not be able to exercise your right to vote the ordinary shares underlying your ADSs.
Holders of ADSs may exercise voting rights with respect to the ordinary shares represented by the ADSs
only in accordance with the provisions of the deposit agreement. The deposit agreement provides that,
upon receipt of notice of any meeting of holders of our ordinary shares, the depositary will fix a record
date for the determination of ADS holders who shall be entitled to give instructions for the exercise of
voting rights. Upon timely receipt of notice from us, if we so request, the depositary shall distribute to the
holders as of the record date (i) the notice of the meeting or solicitation of consent or proxy sent by us and
(ii) a statement as to the manner in which instructions may be given by the holders.
You may instruct the depositary of your ADSs to vote the ordinary shares underlying your ADSs.
Otherwise, you will not be able to exercise your right to vote, unless you withdraw the ordinary shares
underlying the ADSs you hold. However, you may not know about the meeting far enough in advance to
withdraw those ordinary shares. If we ask for your instructions, the depositary, upon timely notice from
us, will notify you of the upcoming vote and arrange to deliver our voting materials to you. We cannot
guarantee you that you will receive the voting materials in time to ensure that you can instruct the
depositary to vote your ordinary shares or to withdraw your ordinary shares so that you can vote them
yourself. If the depositary does not receive timely voting instructions from you, it may give a proxy to a
person designated by us to vote the ordinary shares underlying your ADSs. In addition, the depositary and
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its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out
voting instructions. This means that you may not be able to exercise your right to vote, and there may be
nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested.
You may be subject to limitations on the transfer of your ADSs and the withdrawal of the underlying
ordinary shares.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its books
at any time or from time to time when it deems expedient in connection with the performance of its
duties. The depositary may refuse to deliver, transfer or register transfers of your ADSs generally when
our books or the books of the depositary are closed, or at any time if we or the depositary think it is
advisable to do so because of any requirement of law, government or governmental body, or under any
provision of the deposit agreement, or for any other reason subject to your right to cancel your ADSs and
withdraw the underlying ordinary shares. Temporary delays in the cancellation of your ADSs and
withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer
books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a
shareholders’ meeting or we are paying a dividend on our ordinary shares. In addition, you may not be
able to cancel your ADSs and withdraw the underlying ordinary shares when you owe money for fees,
taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any
laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other
deposited securities.
As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and
are permitted to file less information with the SEC than a U.S. company.
We are a foreign private issuer, as defined in the SEC’s rules and regulations and, consequently, we are
not subject to all of the disclosure requirements applicable to public companies organized within the
United States. For example, we are exempt from certain rules under the Exchange Act that regulate
disclosure obligations and procedural requirements related to the solicitation of proxies, consents or
authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules
under Section 14 of the Exchange Act. In addition, our Executive Board and Supervisory Board members
are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange
Act and related rules with respect to their purchases and sales of our securities. Moreover, while we
currently make annual and semi-annual filings with respect to our listing on Euronext Paris and file
financial reports on an annual and semi-annual basis, we are not required to file periodic reports and
financial statements with the SEC as frequently or as promptly as U.S. public companies and are not
required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act.
In addition, foreign private issuers are not required to file their annual report on Form 20-F until four
months after the end of each fiscal year. Accordingly, there is and will be less publicly available
information concerning our company than there would be if we were not a foreign private issuer.
As a foreign private issuer, we are permitted to adopt certain home country practices in relation to
corporate governance matters that differ significantly from Nasdaq corporate governance listing
standards and these practices may afford less protection to shareholders than they would enjoy if we
complied fully with Nasdaq corporate governance listing standards.
As a foreign private issuer listed on Nasdaq, we are subject to their corporate governance listing
standards. However, Nasdaq rules permit foreign private issuers to follow the corporate governance
practices of their home country. Some corporate governance practices in France may differ significantly
from Nasdaq corporate governance listing standards. For example, neither the corporate laws of France
nor our bylaws require a majority of our Supervisory Board members to be independent and although the
corporate governance code to which we currently refer (the AFEP/MEDEF code) recommends that, in a
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widely-held company like ours, a majority of the Supervisory Board members be independent (as
construed under such code), this code only applies on a “comply-or-explain” basis and we may in the
future either decide not to apply this recommendation or change the corporate code to which we
refer. Furthermore, we include non-independent members of the Supervisory Board as members of our
compensation and nomination committee, and our independent Supervisory Board members do not
necessarily hold regularly scheduled meetings at which only independent members of the Supervisory
Board are present. Currently, we intend to follow home country practice to the maximum extent possible.
Therefore, our shareholders may be afforded less protection than they otherwise would have under
corporate governance listing standards applicable to U.S. domestic issuers. For an overview of our
corporate governance practices, see “Item 16G.—Corporate Governance.”
We are an “emerging growth company” under the JOBS Act and are be able to avail ourselves of
reduced disclosure requirements applicable to emerging growth companies, which can make our
ordinary shares ADSs less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of
certain exemptions from various reporting requirements that are applicable to other public companies that
are not “emerging growth companies,” including not being required to comply with the auditor attestation
requirements of Section 404(b) of the Sarbanes-Oxley Act, and exemptions from the requirements of
holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved. In addition, Section 107 of the JOBS Act also provides that
an emerging growth company can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. We will
not take advantage of the extended transition period provided under Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards.
We cannot predict if investors will find the ordinary shares or ADSs less attractive because we may rely
on these exemptions. If some investors find the ordinary shares or ADSs less attractive as a result, there
may be a less active trading market for the ordinary shares or ADSs and the price of the ordinary shares or
ADSs may be more volatile. We may take advantage of these exemptions until such time that we are no
longer an emerging growth company. We would cease to be an emerging growth company upon the
earliest to occur of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual
revenue; (2) the date we qualify as a “large accelerated filer” with at least $700 million of equity
securities held by non-affiliates; (3) the issuance, in any three year period, by our company of more than
$1.0 billion in non-convertible debt securities held by non-affiliates; and (4) the last day of the fiscal year
ending after the fifth anniversary of our initial public offering of the ADSs.
We may lose our foreign private issuer status in the future, which could result in significant additional
cost and expense.
While we currently qualify as a foreign private issuer, the determination of foreign private issuer status is
made annually on the last business day of an issuer’s most recently completed second fiscal quarter and,
accordingly, our next determination will be made on June 30, 2020. In the future, we would lose our
foreign private issuer status if we to fail to meet the requirements necessary to maintain our foreign
private issuer status as of the relevant determination date. For example, if more than 50% of our securities
are held by U.S. residents and more than 50% of the members of our Executive Board or Supervisory
Board are residents or citizens of the United States, we could lose our foreign private issuer status.
The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be
significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer, we
will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the
SEC, which are more detailed and extensive in certain respects than the forms available to a foreign
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private issuer. We would be required under current SEC rules to prepare our financial statements in
accordance with U.S. generally accepted accounting principles, or U.S. GAAP, rather than IFRS, and
modify certain of our policies to comply with corporate governance practices required of U.S. domestic
issuers. Such conversion of our financial statements to U.S. GAAP would involve significant time and
cost. In addition, we may lose our ability to rely upon exemptions from certain corporate governance
requirements on U.S. stock exchanges that are available to foreign private issuers such as the ones
described above and exemptions from procedural requirements related to the solicitation of proxies.
If we are a passive foreign investment company, there could be adverse U.S. federal income tax
consequences to U.S. holders.
Based on our analysis of our income, assets, activities and market capitalization for our taxable year
ended December 31, 2020, we believe that we were not a passive foreign investment company, or PFIC,
for the taxable year ended December 31, 2020. However, there can be no assurance that we will not be a
PFIC in the current year or for any future taxable year. Under the Code, a non-U.S. company will be a
PFIC for any taxable year in which (1) 75% or more of its gross income consists of passive income or (2)
50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the
production of, passive income. For purposes of these tests, passive income includes dividends, interest,
gains from the sale or exchange of investment property and certain rents and royalties. In addition, for
purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by
value of the shares of another corporation is treated as if it held its proportionate share of the assets and
received directly its proportionate share of the income of such other corporation. If we are a PFIC for any
taxable year during which a U.S. holder (as defined below under “Item 10E.—Taxation – Material U.S.
Federal Income Tax”) holds our ordinary shares or ADSs, we will continue to be treated as a PFIC with
respect to such U.S. holder in all succeeding years during which the U.S. holder owns the ordinary shares
or ADSs, regardless of whether we continue to meet the PFIC test described above, unless the U.S. holder
makes a specified election once we cease to be a PFIC. If we are a PFIC for any taxable year during
which a U.S. holder holds our ordinary shares or ADSs, the U.S. holder may be subject to adverse tax
consequences regardless of whether we continue to qualify as a PFIC, including ineligibility for any
preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes
treated as deferred, and additional reporting requirements. For further discussion of the PFIC rules and the
adverse U.S. income tax consequences in the event we are classified as a PFIC, see the section of this
Annual Report titled “Item 10E.—Taxation– Material U.S. Federal Income Tax Considerations”
If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be
subject to adverse U.S. federal income tax consequences.
If a U.S. holder is treated as owning, directly, indirectly or constructively, at least 10% of the value or
voting power of our ordinary shares or ADSs, such U.S. holder may be treated as a “United States
shareholder” with respect to each “controlled foreign corporation” in our group, if any. Our group
currently includes one U.S. subsidiary and, therefore, under current law our current non-U.S. subsidiary
and any future newly formed or acquired non-U.S. subsidiaries will be treated as controlled foreign
corporations, regardless of whether we are treated as a controlled foreign corporation. A United States
shareholder of a controlled foreign corporation may be required to annually report and include in its U.S.
taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and
investments in U.S. property by controlled foreign corporations, regardless of whether we make any
distributions. An individual that is a United States shareholder with respect to a controlled foreign
corporation generally would not be allowed certain tax deductions or foreign tax credits that would be
allowed to a United States shareholder that is a U.S. corporation. Failure to comply with controlled
foreign corporation reporting obligations may subject a United States shareholder to significant monetary
penalties. We cannot provide any assurances that we will furnish to any United States shareholder
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information that may be necessary to comply with the reporting and tax paying obligations applicable
under the controlled foreign corporation rules of the Code. U.S. holders should consult their tax advisors
regarding the potential application of these rules to their investment in our ordinary shares or ADSs.
Item 4. Information on the Company.
A.
History and Development of the Company
Our legal name and commercial name is Innate Pharma S.A. We were incorporated under the laws of
France on September 23, 1999 as a société par actions simplifiée and converted into a société anonyme,
or S.A., on June 13, 2005. Our headquarters are located at 117, Avenue de Luminy, 13009 Marseille,
France. In 2008, we incorporated our wholly-owned U.S. subsidiary, Innate Pharma Inc. In 2019, we
incorporated our wholly-owned French subsidiary, Innate Pharma France S.A.S (registered under number
SIREN 844 853 119).
We are registered at the Marseille Business and Company Registry (Registre du commerce et des
sociétés) under the number SIREN 424 365 336 RCS Marseille. Our telephone number at our principal
executive offices is +33 4 30 30 30 30. Our wholly-owned U.S. subsidiary is located at 2273 Research
Boulevard, Suite 350, Rockville, MD 20850, United States.
Our website address is www.innate-pharma.com. The reference to our website is an inactive textual
reference only and information contained in, or that can be accessed through, our website is not part of
this Annual Report. The U.S. Securities and Exchange Commission maintains a website (www.sec.gov)
that contains reports, proxy and information statements and other information regarding registrants, such
as Innate, that file electronically with the SEC.
Our capital expenditures in the years ended December 31, 2018, 2019 and 2020 primarily related to
acquisitions and additional considerations linked to purchased licenses, and acquisitions of laboratory
equipments. Clinical research and development costs are not capitalized until marketing authorizations
are obtained.
B.
Business Overview
Innate Pharma S.A. is a global, clinical-stage, oncology-focused biotech company dedicated to improving
oncology treatment and clinical outcomes for patients through therapeutic antibodies that harness the
immune system to fight cancer. Innate Pharma’s broad pipeline of antibodies includes several potentially
first-in-class clinical and preclinical candidates for cancers patients with high unmet medical need.
We have extensive experience in research and development in immuno-oncology, having been pioneers in
the understanding of natural killer cells, or NK cells and benefited from leading antibody engineering
capabilities, biology, and later expanding our expertise in tumor antigens targeting. We have developed,
internally and through our business development strategy, a broad and diversified portfolio including
four clinical product candidates and a robust preclinical pipeline. We have entered into collaborations
with leaders in the biopharmaceutical industry, such as AstraZeneca and Sanofi, to leverage their
development capabilities and expertise for some of our candidates, and we have received upfront and
milestone payments and equity investments from our collaborations of an aggregate of approximately
$620 million over the last ten years. We believe our product candidates and clinical development
approach are differentiated from current immuno-oncology therapies and have the potential to
significantly improve the clinical outcome for patients with cancer.
The immune system is the body’s natural defense against invading organisms and pathogens and is
comprised of two arms: the innate immune system and the adaptive immune system. Recent
immunotherapy developments have focused on generating a tumor antigen-specific T cell response and
have led to an unprecedented change in the treatment paradigm of many solid tumor cancers. Despite
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these successes, the breadth and durability of the clinical benefit achieved has been limited to a subset of
patients and tumor types because of limited effect against solid tumors and toxicity. Our innovative
approach to immuno-oncology aims to broaden and amplify anti-tumoral immune responses by
leveraging both the adaptive and the innate immune systems.
The innate immune system is comprised of a variety of cells, including NK cells, which are involved in
anti-cancer immunosurveillance through a variety of modalities. Activation of the innate immune system
also helps trigger the adaptive immune system to elicit a response directed against specific antigens and
can provide durable immune memory. Our scientific expertise, strategic collaborations and discovery
engine harness the potential of the innate immune system.
We are developing a pipeline of innovative immunotherapies that we believe have the potential to provide
significant clinical benefits to cancer patients. We are also applying our commercial, clinical and
preclinical pipeline, when relevant, to inflammatory disease. The following table summarizes our current
pipeline.
In addition to these product candidates, we have an active development pipeline with programs in the
discovery and preclinical stages.
Our collaborations allow us to leverage the expertise and resources of large pharmaceutical companies
and research institutions with the goal of accelerating the development of several of our product
candidates while providing us with financing to expand the development of our proprietary product
candidates. Over the last ten years we have received an aggregate of approximately $620 million in
upfront and milestone payments and equity investments from our collaborations. Under our existing
collaboration agreements and license agreements that become effective upon the exercise by our
collaborators of options to license future product candidates, we may be eligible to receive an aggregate
of approximately $5.4 billion in future contingent payments. With respect to the programs for which we
have an existing collaboration or similar agreement, future contingent payments are dependent upon our
achievement of specified development and sales milestones. With respect to the programs for which our
collaborators have been granted an option, future contingent payments are dependent upon our
collaborators exercising such options, which would result in up-front option exercise fees, and upon our
achievement of specific development and sales milestones in those particular programs. The aggregate
$5.4 billion in future contingent payments assumes that our collaborators exercise all of the options we
have granted to them and that we achieve all related development, clinical, regulatory and sales
milestones.
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Our Strategy
Our goal is to harness the immune system for the treatment of oncological conditions with serious unmet
medical needs. By leveraging our extensive experience in immuno-oncology research and development,
we strive to continue to discover and develop a broad and diversified portfolio of first and best-in class
immunotherapies across various therapeutic modalities. The key elements of our strategy include:
• Deliver our programs and improve patient outcomes in indications with high unmet
medical need by building on our scientific discoveries.
◦
Execute the clinical development of our wholly owned product candidate, lacutamab, for
the treatment of patients with Sézary syndrome, MF and PTCL.
◦ Drive the development of our proprietary portfolio, including the next generation asset
NK cell engagers (NKCEs).
• Build a sustainable business.
◦ Maximize the value of our partnered product candidates under our various collaboration,
licence and option agreements, under which we may be eligible to receive up to an
aggregate of approximately $5.4 billion in future contingent payments, including up-front
option exercise fees and payments upon the achievement of specified development and
sales milestones.
◦
◦
Invest in the ongoing clinical program of monalizumab for the treatment of SCCHN,
including the ongoing Phase 3 Interlink-1 and the current Phase 2 clinical trial
IPH201-203 in IO naïve SCCHN in combination with with cetuximab and durvalumab,
which, together with the data from other current clinical trials performed by our partner,
will inform further development and the potential path to market.
Explore the potential of our wholly owned product candidate, avdoralimab, to treat
inflammatory-related diseases such as BP or severe cases of COVID-19, which have been
shown to be related to dysregulation of inflammatory immune responses.
◦ Continue to explore opportunities to accelerate the development of our proprietary
pipeline programs through additional collaborations.
◦ Combine our disciplined business development strategy with our immuno-oncology
research and development capabilities to further expand our product portfolio.
◦
Expand our pipeline of proprietary product candidates that target novel pathways in
immuno-oncology using our internal development engine.
Activating Innate Immunity: Harnessing the Power of Immunotherapy to Treat Cancer
The Innate Immune System: Gatekeeper of the Adaptive Immune System
The immune system is the body’s defense against invading organisms and pathogens and is comprised of
two arms: the innate immune system and adaptive immune system.
The innate immune system represents the first barrier of immune defense because it reacts almost
immediately against threats and serves as a catalyst to mobilize other components of the immune system.
The innate immune system functions to identify, attack and kill pathogens or cancer cells, produce
cytokines and activate the complement cascade and the adaptive immune system through antigen
presentation. These functions involve a variety of cells, including NK cells, dendritic cells, monocytes,
macrophages and neutrophils. These cells then launch adaptive immune responses while also mounting
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their own effector responses. Throughout the body, cells of the innate immune system play a critical role
in the immunosurveillance and detection of the formation of cancer cells.
Once activated, the adaptive immune system responds with large numbers of effector cells directed
against specific antigens and can provide durable immune memory. An adaptive immune response is
highly specific to particular antigens expressed by pathogens or cancer cells, but it requires time to
develop in a process known as priming. Key components of the adaptive immune system include
antibodies, which are produced by B cells, bind to antigens and mark them for destruction by other
immune cells, and T cells, which recognize antigens on diseased cells and then attack and eliminate them.
The adaptive immune response is targeted and potent and has the potential to provide a long-lasting
immune memory.
Key Elements to Modulating the Activity of Immune Cells to Treat Cancer
Cells implicated in innate and adaptive immunity can have different impacts on the treatment of cancer.
While cytotoxic CD8+ T cells and NK cells help eliminate tumors, subsets of T cells, such as regulatory T
cells, and subsets of myeloid cells, such as myeloid-derived suppressor cells (MDSCs), can be harmful to
the host by contributing to an immunosuppressive environment and promoting tumor growth.
Immune cell activity is controlled by many activating and inhibitory factors, including activating
receptors and inhibitory receptors, called checkpoints, which are expressed at the surface of these cells.
PD-1, LAG-3, TIGIT and NKG2A are examples of inhibitory checkpoints while OX-40, CD137, NKG2D
and NKp46 are examples of activating checkpoints. When engaged, the inhibitory checkpoints can impair
anti-tumor immunity of adaptive and innate immune cells such as CD8+ T cells or NK cells, thereby
contributing to tumor escape from immune control. Inhibitory checkpoints are potential therapeutic
targets for restoring anti-cancer immunosurveillance.
The Role of the Innate Immune System as a Modality for Cancer Therapies with Significant Potential
Cancer has historically been treated with surgery, radiation therapy, chemotherapy, targeted therapy,
hormone therapy or a combination of these treatments that are directed at the tumor itself. More recently,
advances in the understanding of the immune system’s role in cancer have led to immunotherapy
becoming an important therapeutic modality, shifting the therapeutic target from the tumor to the host and
focusing on the immune system and the TME in order to reactivate its immunosurveillance against
cancer.
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Cancer immunotherapy began with treatments that did not specifically activate the immune system, such
as IL-2 and IFNa cytokines therapies, which had limited efficacy, significant toxicity or both. More recent
immunotherapy developments have instead focused on the generation of a tumor antigen-specific T cell
response, in particular by modulating the activity of inhibitory receptors expressed by T cells. This
modulation can limit T cells expansion, such as with anti-CTLA-4 therapy, or limit their effector
properties, such as with anti-PD-1 or anti-PD-L1 therapies. The therapeutic targeting of inhibitory
receptors controlling T cell function has led to an unprecedented change in the treatment paradigm of
many cancers in solid tumors, such as melanoma, non-small cell lung cancer and renal cell carcinoma,
and in hematopoietic malignancies, such as Hodgkin lymphoma. Despite these successes, the breadth and
durability of clinical benefit achieved has been limited to a subset of patients and tumor types.
The onset, maintenance and development of long-lasting, protective T cell responses are dependent on
innate immune cells; NK cells which are lymphocytes of the innate immune system participate to this
process.
Harnessing Innate Immunity in Cancer: NK Cells as a Key Player in the Anti-Tumor Immune
Response
NK cells are part of the innate immune system and represent a significant fraction of the total number of
cytotoxic cells in the body. They are active in many hematological and solid tumors and play a key role in
the initiation of the T cell response.
Checkpoints expressed on NK cells include inhibitory cell surface receptors, such as NKG2A, and
activating NK cell receptors, such as NKp46. NKp46 is the most specific NK cell marker identified to
date across organs and species. Other receptors, such as NKG2A, are more prevalent in certain subsets of
NK cells, including NK cells infiltrating the tumor, and are also present on tumor infiltrating CD8+ T
cells.
NK cells are involved in the anti-cancer immunosurveillance through a variety of direct and indirect
effects. The figure below provides an illustration of anti-cancer functions of NK cells.
1 NK cells are able to directly and
selectively kill cells undergoing stress
caused by a cancerous transformation or
pathogen infection, a process called
natural cytotoxicity.
2 NK cells can also kill target cells when
they are coated by antibodies in a
process called antibody-dependent
cellular cytotoxicity (ADCC).
3 NK cells are also potent producers of
cytokines, which are soluble molecules
that recruit and activate an adaptive
immune response by T cells through
dendritic or other antigen-presenting
cells, which in turn may enable the
generation of immune memory against
tumor cells.
By providing the initial catalyst for the multilayered immune response, the activation of the innate
immune system through the targeting of NK cells could potentially result in an optimal anti-tumoral T cell
response.
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Our response to cancer: harnessing the innate immunity against cancer
We have developed a pipeline around the three main innovative strategies in modern immuno-oncology:
•
The first of these strategies is to directly target cancer cells though an antibody targeting a tumor
antigen and causing its destruction. Lacutamab and the NKCE format antibodies such as IPH61
use this strategy.
• Another strategy, known as immuno-oncology, consists in unleashing the immune system. We
have developed two approaches to immune-oncology:
◦ Checkpoint inhibitors: the development of antibodies that target immune checkpoints has
been one of the greatest advances in cancer treatment over the last 10 years. Notably, the
current approved checkpoint inhibitors target the CTLA-4 and PD-1/PD-L1 pathways on
T cells. These treatments have shown an ability to activate T cells, shrink tumors and
improve patient survival in a broad range of tumors. We are developing broad spectrum
checkpoint inhibitors targeting inhibitory checkpoints expressed on several cell types in
order to potentially increase the breadth and quality of anti-tumor response. Our most
advanced checkpoint inhibitor product candidate, monalizumab, is potentially a first-in-
class, dual checkpoint inhibitor designed to activate both tumor-infiltrating NK cells and
CD8+ T cells, likely resulting in increased effector functions and greater killing of the
tumor by the immune system. We have partnered with AstraZeneca to develop this
product which is currently being tested in Phase 3.
◦
Tumor’s microenvironment (TME): the TME can inhibit both innate and adaptive
immune responses either by producing or degrading key metabolites or by recruiting
suppressive cells, or both. For example, adenosine is one of the components of the TME
that most broadly affects immune response. It is produced by the sequential degradation
of extracellular adenosine triphosphate, or ATP, by the following two enzymes: first
CD39, which degrades the ATP into adenosine monophosphate, or AMP, and then
second, CD73, which impairs the AMP into adenosine. For this reason, this pathway has
attracted significant development efforts that have been focused primarily on the
downstream part of the adenosine degradation cascade, CD73 and the adenosine
receptors. We are developing a potentially best-in-class anti-CD73 antibody, and have
also focused on the upstream part of the cascade, CD39, in order to block the production
of immunosuppressive adenosine and increase the pool of immuno-stimulatory
extracellular ATP. We believe this approach is also potentially mechanistically
synergistic with many therapies, particularly with our checkpoint inhibitor and tumor-
targeting product candidates and programs.
We are using our leading antibody engineering capabilities to generate classic antibody formats as well
as innovative first-in-class antibody-derived drug candidates and synthetic molecules such as NKCEs,
to harness the anti-tumor activity of NK cells.
Antigen-targeting antibody development is highly dependent upon several factors, including the pattern of
expression of the target and the intended mechanism of action. We are targeting tumor antigens that are
generally highly-expressed in tumor tissues but poorly-expressed in healthy tissues in order to develop
product candidates through two approaches:
• Our most advanced proprietary program, lacutamab, is a potentially first-in-class tumor-targeting
antibody targeting KIR3DL2, seeking to induce the killing of cells expressing the tumor antigen.
We are developing lacutamab for the treatment of various forms of TCL, such as CTCL,
including its aggressive subtype, Sézary syndrome, and PTCL.
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• We have also developed a proprietary multi-specific antibody format that leverage an activating
receptor, NKp46. Our multi-specific antibodies co-engage both NKp46, with or without CD16,
and the tumor antigen. This approach has the potential to more effectively mobilize NK cells than
anti-tumor cytotoxic antibodies because, in the TME of many solid tumors, CD16, the receptor
mediating the killing of tumor cells by IgG1 antibodies, can be downregulated on NK cells
whereas NKp46 expression is conserved on tumor-infiltrating NK cells. On January 4 2021, we
announced that Sanofi had made the decision to progress IPH6101/SAR443579 into
investigational new drug (IND)-enabling studies. IPH6101/SAR443579 is an NKp46-based NK
cell engager (NKCE) using Innate’s proprietary multispecific antibodies format. We are currently
pursuing this innovative approach with a second undisclosed target with Sanofi and another
undisclosed target with AstraZeneca, and proprietary targets. We believe that bridging innate
effector cells with the tumor antigen through a multi-specific molecule has the potential to
overcome limitations of current strategies focused on artificially redirecting T cells towards the
tumors, either with chimeric antigen receptor (CAR) T cells or T cell engagers. Although these
current strategies have had significant success in certain hematologic malignancy indications,
they are often associated with serious adverse events including cytokine release syndrome and
neurologic complications. Data from our preclinical studies suggest that our NKp46-NKCEs are
not associated with inflammatory cytokine release and exhibit anti-tumoral activity in solid tumor
mouse models, providing a rationale for investigating the impact of NKCE in patients beyond
hematologic malignancies.
Our Product Pipeline
Lacutamab (IPH4102), a Tumor Targeting Anti-KIR3DL2 Antibody
a. Mechanism & Rationale
We are developing our wholly owned product candidate lacutamab for the treatment of certain subtypes
of T-Cell Lymphoma (TCLs), including Cutaneous T-Cell Lymphoma (CTCL) and Peripheral T-Cell
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Lymphoma (PTCL). Lacutamab is designed to bind to the KIR3DL2 receptor and to kill cancer cells by
Antibody Directed Cell Cytotoxicity (ADCC), as illustrated in the following figure.
KIR3DL2 is a receptor of the Killer Immunoglobulin like Receptor (KIR) family. In our preclinical
studies, we have observed that KIR3DL2 is not expressed on healthy tissues, except on a subset of NK
cells (36%) and T cells (12% of CD8+ and 4% of CD4+) (IPH internal data). In addition, KIR3DL2 is
expressed in T-cell lymphoma. 65% of CTCL patients express KIR3DL2 and approximately 50% of
patients with MF, the most common type of CTCL, also express KIR3DL2 (Battistella, 2017). This
frequency increases for the most aggressive CTCL subtypes, including 90% of Sézary syndrome
(Roelens, 2019). Lastly, approximately 50% of patients with PTCL also express KIR3DL2 (Cheminant,
ICML Meeting, 2019).
In January 2019, the FDA granted lacutamab Fast Track Designation for the treatment of adults with
Relapsed/Refractory (R/R) Sézary syndrome who have received at least two prior systemic therapies.
Lacutamab has also been granted orphan drug designation for the treatment of CTCL in the European
Union and in the United States. In May 2019, we initiated a Phase 2 clinical trial evaluating lacutamab in
different subtypes of TCL.
In November 2020, Innate Pharma received Priority Medicines (PRIME) designation from the EMA for
lacutamab, for the treatment of patients with relapsed or refractory Sézary syndrome (SS) who have
received at least two prior systemic therapies. PRIME designation supports the potential for lacutamab to
benefit Sézary Syndrome patients in need of new treatment options. The PRIME designation is based on
efficacy data in relapsed or refractory SS patients from the completed Phase 1 dose escalation and
expansion trial, and is supported by safety data in SS patients from both the Phase 1 trial and ongoing
Phase 2 TELLOMAK clinical trial.
b.
Indication
i.
Cutaneous T Cell Lymphoma
CTCL is a heterogeneous group of non-Hodgkin’s lymphomas that are characterized by the abnormal
accumulation of malignant T cells, primarily in the skin. CTCL accounts for approximately 4% of all non-
Hodgkin’s lymphomas and has a median age at diagnosis of 55 to 60 years (Dobos, 2020; Fuji, 2020).
There are approximately 2,200-4,000 new CTCL cases diagnosed per year in Europe and the United
States combined (SEER Cancer Statistics Review 1975-2017; Dobos, 2020; Zhang, 2019; Gilson, 2019).
The most common type of CTCL is mycosis fungoides, or MF, accounting for approximately half of all
CTCLs (Dobos, 2020, Bradford, 2009). Sézary syndrome, characterized by the presence of lymphoma
cells in the blood, is a CTCL subtype with a particularly poor prognosis. The following table outlines the
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most common CTCL types, their frequency as a percentage of all cases of CTCL (Dobos, 2020), and the
prognosis (WHO-EORTC classification 2018 : Willemze2019).
CTCL Type
Mycosis fungoides
Primary cutaneous CD30+ lympho-proliferative disorders
Primary cutaneous CD4+ small/medium T-cell
lymphoproliferative disorder
Mycosis fungoides variants
Sézary syndrome
Frequency (%)
Worlwide
5-year disease-specific
survival (%)
62
16
2
6
3
88
95-99
100
75-100
36
Patients with advanced CTCL have a poor prognosis with few therapeutic options and no standard of
care. Treatment generally includes skin-directed therapies, such as topical corticosteroids, and systemic
treatments, such as steroid drugs and interferon, for patients with more advanced disease or for whom
skin-directed therapies failed.
Two new drugs have recently been approved for the treatment of CTCL:
• Brentuximab vedotin (marketed as Adcetris), has been approved by the FDA for the treatment of
patients with primary cutaneous anaplastic large cell lymphoma, or pcALCL, or CD30-expressing
MF who have received prior systemic therapy. In Europe, brentuximab vedotin is indicated for
the treatment of adult patients with R/R CD30+ CTCL who require systemic therapy. The
response rate to brentuximab vedotin was 67% compared to 20% in the control group
(physician’s choice of either methotrexate or bexarotene) and the median progression-free
survival was 16.7 months compared to 3.5 months for the control group. Brentuximab vedotin
was associated with a 45% risk of peripheral neuropathy, which led to a discontinuation of the
treatment in 12% of the patients and the inclusion of a warning on the label (Prince, 2017).
Brentuximab vedotin is not approved in Sézary syndrome.
• Mogamulizumab (marketed as Poteligeo), has been approved by the FDA and the EMA for the
treatment of adult patients with R/R MF or Sézary syndrome after at least one prior systemic
therapy. The response rate to mogamulizumab was 28%, compared to 5% in the control group
(vorinostat), and the median progression-free survival was 7.6 months compared to 3.1 months
for the control group. The most common AEs were rash, infusion-related reactions, fatigue,
diarrhea, upper respiratory tract infection and musculoskeletal pain (Kim, 2018).
Although these new treatments represent progress in the treatment of CTCL, they are still associated with
the safety and efficacy limitations observed in their respective clinical trials. Further, even with these
options, the vast majority of these treated patients eventually relapse and the overall survival rate remains
poor.
ii.
Peripheral T-Cell Lymphoma
PTCL is a diverse group of aggressive non-Hodgkin’s lymphomas that develop from mature T cells and
NK cells. PTCL arises in the lymphoid tissues outside of the bone marrow, such as in the lymph nodes,
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spleen, gastrointestinal tract and skin (Hsi, 2017). The various PTCL types, their frequency as a
percentage of all TCL cases (Hsi, 2017), and prognosis (Vose, 2018) are shown in the following table.
PTCL Type
PTCL not otherwise specified
Angioimmunoblastic
Anaplastic large cell lymphoma, or ALCL, ALK positive
Anaplastic large cell lymphoma, ALK negative
Frequency (%)
U.S
5-year overall survival (%)
32
16
6
11
32
32
70
49
Irrespective of the specific regimen used (single agent chemotherapy or combination chemotherapy
including GemOx), patients with R/R PTCL typically experience a poor outcome, with a median
progression-free survival and overall survival of 3.1 months and 5.5 months, respectively (Mak, 2013).
Multi-agent chemotherapy is the recommended first line treatment for the majority of patients with PTCL.
Brentuximab vedotin is approved in combination with first line chemotherapy for patients with CD30-
positive PTCL. For patients who are eligible, subsequent stem cell transplantation is a potentially curative
option but it is limited to a minority of patients. Despite these treatments, a high proportion of patients
need second line therapy. Belinostat (marketed as Beleodaq), pralatrexate (marketed as Folotyn) and
romidepsin (marketed as Istodax) have each been approved by the FDA in this setting, but efficacy is
generally limited. In the respective non-randomized clinical registration trials, the response rate to
belinostat, pralatrexate and romidepsin were each less than 30%, and the median duration of response was
approximately 10 months for belinostat and pralatrexate (O'Connor, 2015 ; O'Connor, 2011; Coiffier,
2012). None of these treatments have been approved by the EMA.
In fact, despite these approvals, current treatment guidelines (NCNN 2021) recommend participation in a
clinical trial as a preferred option for patients with relapsed PTCL after first line treatment. If clinical
trials are not available, a chemotherapy combination of gemcitabine and oxaliplatin, or GemOx, is listed
as one of the preferred treatment combinations (ESMO Lymphoma Guidelines). Several studies have
been published on the role of GemOx in patients with relapsed lymphoma and it is one of the most widely
used regimens for this patient population in the United States, Europe and Asia (Mounier, 2013;
Yamaguchi, 2012).
c. Preclinical Development
Recent preclinical data presented in June 2019 support the rationale of evaluating the potential of
lacutamab in larger subsets of patients with TCL. The findings demonstrate that KIR3DL2 is expressed in
multiple subtypes of PTCL and that the incubation of TCL cell lines with a chemotherapy regimen
consisting a combination of gemcitabine and oxaliplatin, or GemOx, enhanced KIR3DL2 expression.
Moreover, we observed that the combination of lacutamab and GemOx improved anti-tumor activity
against a KIR3DL2-positive T-cell line in vitro.
Additionally, we believe this preclinical data supports the potential expansion of the lacutamab
development program into Adult T-cell leukemia/lymphoma, or ATLL, which is mostly prevalent in Asia,
particularly in Japan. The data demonstrates that KIR3DL2 expression is mainly associated with the
ATLL acute subtype, a subtype that is the most frequently observed and associated with the poorest
prognosis.
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d. Clinical results
i.
Phase I Clinical Trial
In November 2015, we began a Phase 1 dose-escalating and cohort expansion clinical trial to evaluate
lacutamab for the treatment of advanced CTCL. The trial was completed in April 2020, and enrolled 44
patients, including 35 patients with Sézary syndrome and 8 patients with mycosis fungoides. The primary
objective of the trial was to evaluate lacutamab safety, and to identify DLTs and the maximum tolerated
dose. Data from this trial were presented at the 2018 meeting of the American Society of Hematology,
and reported in Lancet Oncology in 2019 by Bagot et al. We reported clinical activity in the subgroup of
35 Sézary syndrome patients, including an observed overall response rate of 42.9%, median duration of
response of 13.8 months, median progression-free survival of 11.7 months and approximately 90% of
patients experienced an improved quality of life. The overall response rate appeared to be higher (53.6%)
in the 28 patients with no histologic evidence of large cell transformation. Clinical activity was associated
with a substantial improvement in quality of life as assessed by the Skindex29 and Pruritus Visual Analog
Scale scores. In a post-hoc analysis of seven patients with Sézary syndrome who were previously treated
with mogamulizumab, three (43%) achieved a global overall response and three others had stable disease
as best response. The remaining patient had a progressive disease.The median duration of response in
these patients was 13.8 months and median progression-free survival after five progression-free survival
events was 16.8 months.
Lacutamab was generally well tolerated. The most common AEs were peripheral edema (27%) and
fatigue (20%), all of which were grade 1 or 2. Lymphopenia was the most frequent IPH4102-related
adverse event and occurred in six (14%) patients (three (7%) grade 3). One patient developed possibly
treatment-related fulminant hepatitis 6 weeks after lacutamab discontinuation and subsequently died.
However, the patient had evidence of human herpes virus-6B infection. Six possibly treatment-related,
grade 3 or above adverse events were observed in five patients (11%) and only four patients (9%) stopped
treatment as a result of an adverse event. One patient stopped treatment because of grade 2 peripheral
neuropathy, one patient stopped treatment because of grade 3 general malaise, one patient because of
grade 3 skin pain and one patient stopped treatment because of several adverse events, including renal
injury, respiratory failure, dysphagia and sepsis.
e. Planned clinical trial
Below is a summary of our planned clinical trials of lacutamab.
Trial
Status
Sponsor
Number of
Patients in Trial
Indication(s)
Phase 2 clinical trial
(TELLOMAK)
Ongoing
Innate Pharma
up to 150
Sézary syndrome and
MF Monotherapy
Phase 1b clinical trial
Planned
Innate Pharma
20 initially + 20
depending on
preliminary data
relapse PTCL that
express KIR3DL2
Monotherapy
Phase 2 clinical Trial
Planned
LYSA 56
relapse/refractory PTCL
that express KIR3DL2
Randomized:
Combination lacutamab
+ GEMOX vs GEMOX
i.
Phase 2 Clinical Trial (TELLOMAK)
In May 2019, we initiated a global, open-label, multi-cohort Phase 2 clinical trial, known as
TELLOMAK. This clinical trial is being conducted at 12 sites in the United States, pursuant to an IND
accepted by the FDA in January 2019, and at 20 sites in France, pursuant to approval by ANSM in
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February 2019, and in Germany, Italy, Spain and the United Kingdom. In this trial, we are evaluating
lacutamab alone. We expect to recruit up to approximately 150 patients, with lacutamab evaluated as a
single agent in approximately 60 patients with Sézary syndrome who have received at least two prior
treatments, including mogamulizumab (Cohort 1), as a single agent in approximately 90 patients with MF
who have received at least two prior systemic therapies. The MF arm will be comprised of two cohorts,
testing lacutamab in KIR3DL2 expressing and non-expressing patients (respectively Cohort 2 and 3).
These cohorts will follow a Simon 2-stage design that will terminate if treatment is considered futile. The
following graphic depicts the trial design:
The primary endpoint of the trial is objective response rate, measured using the 2011 Olsen criteria for
CTCL . Key secondary measures include incidence of treatment-emergent AEs, the effect of skin disease
on quality of life as measured by the Skindex29 questionnaire, pruritus as measured by the Visual Analog
Scale, progression-free survival and overall survival. The results of the dedicated Sézary syndrome cohort
may support a future BLA submission to the FDA.
In November 2019, Impletio Wirkstoffabfüllung GmbH (formerly known as Rentschler Fill Solutions
GmbH), the subcontractor in charge of the fill-and-finish manufacturing operations of lacutamab
unilaterally decided to withdraw the certificates of conformance of all clinical batches produced at their
facilities, including the lacutamab batch used for the TELLOMAK Phase 2 clinical trial assessing
lacutamab in multiple indications. Impletio Wirkstoffabfüllung GmbH decided to withdraw the
certificates of conformance even though the compliance of its manufacturing site with GMP has been
confirmed by two on-site inspections performed by a local regulator before and after we began to work
with them. Impletio Wirkstoffabfüllung GmbH also filed for bankruptcy.
Following this, we have been in discussions with US and European national regulatory authorities
regarding GMP deficiencies at our manufacturing subcontractor site that managed the fill and finish
operations of the lacutamab clinical vials for TELLOMAK.
In January 2020, we reactivated the TELLOMAK trial in Sézary syndrome and MF in France and in the
United Kingdom, following authorization by the respective national authorities.
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In June 2020, the US FDA lifted the partial clinical hold placed on the TELLOMAK phase 2 clinical trial,
based on a quality assessment of a new GMP-certified batch successfully manufactured for the lacutamab
clinical development program, including the TELLOMAK trial.
Regulatory agencies in Spain, Germany and Italy also lifted, in the third quarter of 2020, their partial
clinical holds on the TELLOMAK trial, enabling us to resume recruitment of the trial in these countries.
There were no safety issues related to the trial medication. This is consistent with the review conducted
by the Independent Data Monitoring Committee (IDMC), which concluded there were no safety issues
related to lacutamab, and the product appeared to be well-tolerated among current patients enrolled in the
trial. Lacutamab fill and finish manufacturing operations have been transferred to new CMOs.
The TELLOMAK Phase 2 clinical trial, is now fully open to enrollment in all countries that had a partial
regulatory hold following the successful resolution of Good Manufacturing Practice issues.
In February 2021, the Company announced that lacutamab demonstrated a positive early signal in Cohort
2 testing lacutamab in KIR3DL2 expressing MF patients in the TELLOMAK trial. This cohort reached
the pre-determined number of responses needed to advance to stage 2, allowing the Company to recruit
additional patients.
We expect to start sharing preliminary efficacy data from the TELLOMAK trial for mycosis fungoides in
2021 and Sézary syndrome in 2022.
ii.
Clinical trials in PTCL
The Company is launching a multi-pronged strategy to evaluate lacutamab in KIR3DL2 expressing
PTCL.
A multi center phase 1b monotherapy trial evaluating lacutamab in relapsing KIR3LD2 expressing PTCL
patients. This trial will recruit patients in the United States. Approximately 20 patients will be initially
included in the study, and 20 more may be added based on safety and preliminary level of clinical
activity. The primary endpoint will be safety.
Lacutamab will also be evaluated by LYSA, the Lymphoma Study Association, in an investigator-
sponsored randomized phase 2 study in relapsed/refractory KIR3DL2 expressing PTCL patients, to
evaluate lacutamab in combination with GEMOX (gemcitabine in combination with oxaliplatin) versus
GEMOX alone. This study, named KILT (anti-KIR in T-Cell Lymphoma), will recruit 56 patients in
Europe. The primary endpoint will be clinical activity.
Monalizumab, a Dual Checkpoint Inhibitor Targeting T Cells and NK Cells
a. Mechanism & Rationale
Monalizumab (IPH2201) is a potentially first-in-class immune checkpoint inhibitor targeting NKG2A
receptors expressed on tumor infiltrating cytotoxic CD8+ T cells and NK cells. NKG2A is an inhibitory
receptor for HLA-E. HLA-E is frequently overexpressed in the cancer cells of many solid tumors and
hematological malignancies. By expressing HLA-E, cancer cells can protect themselves from killing by
NKG2A+ immune cells. Monalizumab may reestablish a broad anti-tumor response mediated by NK and
T cells, and may enhance the cytotoxic potential of other therapeutic antibodies (André et al, Cell 2018).
The following illustration provides an overview of monalizumab’s mechanism of action:
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b. Rationale for combinations with monalizumab
We are primarily focused on investigating monalizumab in combination with other approved anti-cancer
agents, including:
•
•
Cetuximab, an antibody directed against EGFR, is used for the treatment of metastatic CRC
and SCCHN. In preclinical models, cetuximab has been observed to bind to EGFR on tumor
cells and thereby trigger ADCC by NK cells. However, the efficacy of ADCC is inhibited by
NKG2A engagement with HLA-E. Our preclinical data support our hypothesis that
monalizumab, by blocking the binding of NKG2A to HLA-E, could enhance the therapeutic
activity of cetuximab.
Durvalumab is an antibody directed against PD-L1. PD-L1 and HLA-E are both up-regulated
on many cancer cells, and they have both been observed to suppress tumor immune response
and contribute to tumor progression. Our preclinical data support our hypothesis that a
monalizumab and durvalumab combination therapy may result in a greater anti-tumor immune
response than durvalumab alone by blocking both the PD-1/PD-L1 and the NKG2A/HLA-E
inhibitory pathways.
The specificity of the combination of cetuximab and monalizumab is produced by the dual targeting of
both activating receptors and inhibitory receptors. Immune checkpoint inhibitors unleash lymphocytes by
blocking inhibitory receptors and rely on endogenous activating receptors expressed on these
lymphocytes to mediate the attack of the tumor cells. In contrast, we believe the combination of
cetuximab and monalizumab will not only unleash NK cells by blocking the inhibitory function of
NKG2A, but also trigger NK cell cytotoxicity via the recognition of cetuximab-coated tumor cells
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through the CD16 receptor. The following illustration depicts the way in which monalizumab, in
combination with cetuximab or durvalumab, is designed to result in greater anti-tumor activity.
The rationale for these combinations is further supported by the favorable tolerability profile of
monalizumab that we observed in preclinical studies and earlier clinical trials, suggesting that
monalizumab is generally not expected to negatively impact the safety profile of the combination partner
drugs.
c.
Indication
We are evaluating the efficiency of monalizumab in clinical trials in collaboration with AstraZeneca in
multiple advanced solid tumors. Innate has been responsible for the development in head and neck
squamous cell carcinoma (SCCHN), an indication where monalizumab is currently evaluated in
combination with cetuximab in a phase 3 trial sponsored by AstraZeneca. In addition, AstraZeneca has
conducted other trials in cancer indications, such as colorectal cancer (CRC) and lung cancer.
SCCHN accounts for approximately 4% of all cancers in the United States. The American Cancer Society
estimates that in 2020, over 65,500 Americans will develop head and neck cancer and over 14,500 will
die from the disease. The survival rate in patients with SCCHN varies greatly depending on the stage of
the cancer at diagnosis. Among patients with more advanced disease (stages III and IV), up to 50%
develop locoregional relapses and/or distant metastases. Once this occurs, the five-year survival rate
drops significantly.
The standard of care for patients with recurrent metastatic or unresectable recurrent head and neck
squamous cell carcinoma (R/M SCCHN) has evolved in the past few years.
For first‑line (1L) treatment of R/M SCCHN, the EXTREME regimen (combination of cetuximab with
platinum and fluorouracil (5-FU) followed by cetuximab until progression or intolerance) has been the
standard of care in the European Union and the USA. Recently, pembrolizumab received United States
Food and Drug Administration (US FDA) approval as a single agent for the 1L treatment of patients with
metastatic or with unresectable, recurrent SCCHN whose tumors express programmed cell death ligand-1
88
(PD‑L1; combined positive score [CPS] ≥ 1) or in combination with platinum and 5-FU for the 1L
treatment of patients with R/M SCCHN regardless of the tumor PD-L1 status.
For second-line treatment of patients with R/M SCCHN progressing after platinum-based therapy,
cetuximab was approved by the US FDA in 2006. In 2016, the US FDA granted approval to
pembrolizumab (under accelerated approval) and another PD-1 inhibitor nivolumab in patients with R/M
SCCHN with disease progression on or after platinum therapy.
However, many patients continue to fail to respond to these treatments and outcomes in patients with
SCCHN remain poor. Treatment for patients with R/M SCHNN who progress after receiving a PD-1
inhibitor, such as pembrolizumab/nivolumab monotherapy or pembrolizumab in combination with
platinum-based chemotherapy, is not clearly defined in the 1L or 2L setting. As no treatment strategies in
the immunotherapy-refractory disease setting are currently approved, there is a large unmet need for new
treatment options in patients who have progressed after receiving an immune checkpoint inhibitor (anti-
PD-1).
d. Clinical development plan
i.
Overview
Monalizumab is being investigated for the treatment of SCCHN, CRC and other tumor types. Below is a
summary of ongoing clinical trials in oncology that we or our collaborator, AstraZeneca, are conducting,
as well as investigator-sponsored trials that are evaluating monalizumab.
89
ii. Clinical development plan in Head and Neck cancer
Innate and AstraZeneca have evaluated monalizumab in combination with cetuximab in R/M SCCHN IO
naïve or IO pretreated in a Phase 1b/2 study (IPH2201-203). Based on the results and the unmet need in
the IO-pretreated population, AstraZeneca and Innate elected to advance this program to a Phase 3 study
(INTERLINK-1). Dosing of the first patient in this trial has triggered a $50 million milestone payment
from AstraZeneca to Innate in October 2020. Innate and AstraZeneca are pursuing the evaluation of
monalizumab in combination with cetuximab and durvalumab in R/M SCCHN IO naïve in the Phase 2
portion of the IPH2201-203 study.
•
IPH2201-203
IPH2201-203 is an open-label, Phase 1b/2 clinical trial in combination with cetuximab and/or durvalumab
in patients with R/M SCCHN. This study is sponsored by Innate Pharma. It includes:
•
•
a Phase 1b dose-escalation portion
a Phase 2 portion comprising three expansion cohorts:
◦
◦
◦
Expansion Cohort 1, which enrolled 43 patients, evaluated the combination of
monalizumab and cetuximab in patients with R/M SCCHN who had been previously
treated with chemotherapy alone or chemotherapy followed by checkpoint inhibitors;
Expansion Cohort 2, which enrolled 41 patients and is evaluating the combination of
monalizumab and cetuximab in patients with R/M SCCHN who have received a
maximum of two prior systemic regimens in the R/M setting and with prior exposure to a
PD-(L)1 inhibitor (who we refer to as IO-pretreated patients); and
Expansion Cohort 3, which enrolled 40 patients, began recruiting in April 2019 and is
evaluating the combination of monalizumab, cetuximab and durvalumab in IO-naïve
patients with R/M SCCHN.
•
INTERLINK-1
INTERLINK-1 is a global, multi-center, randomized, double-blind Phase 3 study of monalizumab and
cetuximab vs. placebo and cetuximab that will enroll approximately 600 patients with recurrent or
metastatic head and neck squamous cell carcinoma of the head and neck (R/M SCCHN) who have been
previously treated with platinum-based chemotherapy and PD-(L)1 inhibitors (“IO-pretreated”). This
study is sponsored by AstraZeneca.
The primary endpoint is overall survival (OS) with secondary endpoints including progression-free
survival (PFS), ORR, duration of response (DoR), safety and quality of life.
e. Clinical results
i.
Head and Neck cancer: IPH2201-203 study
•
Phase 1b dose-escalation
In the Phase 1b dose-escalation portion of the clinical trial, 17 patients with R/M SCCHN were evaluated
across five dose levels of monalizumab (0.4, 1.0, 2.0, 4.0 and 10.0 mg/kg), which was administered every
two weeks, in combination with cetuximab, which was administered intravenously with an initial dose of
400 mg/m2 and subsequent doses of 250 mg/m2. The combination was well tolerated with no additional
safety concerns compared to monalizumab or cetuximab alone. The recommended Phase 2 dose of
monalizumab in combination with cetuximab was established as 10 mg/kg, administered intravenously
every two weeks.
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•
Phase 2: Expansion cohort 1
The primary endpoint for the Phase 2 portion of the trial is objective response rate, which is measured as
the rate of patients who had a complete or partial response according to RECIST 1.1. Secondary
endpoints for the Phase 2 portion of the trial include duration of response, progression-free survival and
overall survival.
As of April 30, 2019, 40 patients were enrolled globally. Monalizumab and cetuximab combination
demonstrated an acceptable safety profile. The trial was declared positive, as the required predefined
number of at least 8 responses was reached with an ORR of 27.5% (36% and 17% in IO naïve and IO
pretreated patients, respectively). With a median follow-up of 17 months (mo), median OS is 8.5 mo with
a trend for improved survival in IO-pretreated pts (14.1 mo in IO-pretreated patients and 7.8 in IO naïve
patients, respectively) and 12 mo OS rate of 44% (60% in IO-pretreated and 32% in IO naïve patients,
respectively). The following figures show PFS and OS in all patients and by previous IO.
An additional cohort of 40 patients (expansion cohort 2) with R/M SCCHN who have received both
platinum-based chemotherapy and anti-PD(L)1 has been conducted to confirm the preliminary results
observed in this subgroup, a population with a continued high unmet medical need.
•
Phase 2: Expansion cohort 2
As of August 31, 2020, 40 patients with R/M SCCHN post platinum and anti-PD-(L)1 were included in
cohort 2 in the United States and France. Median duration of follow-up (FU) was 13.1 months (range
7.9-15.9). The tables below show the responses, the PFS and OS of patients enrolled in cohort 2.
91
In cohort 1 of the study, 19 patients were enrolled with the same selection criteria and similar
characteristics as cohort 2 and received platinum and post anti-PD-(L)1. An exploratory analysis
combining these patients to those enrolled in cohort 2 is provided in the figure below.
The monalizumab and cetuximab combination therapy demonstrates a good safety profile and promising
activity in R/M SCCHN post platinum and post anti-PD-(L)1 where no treatment options were currently
approved. In this population with a high medical need, we observed a high response rate of 20% and
promising 6- and 12-month OS of 80% and 33% with monalizumab combined with cetuximab.
Based on these results, a randomized Phase 3 trial is underway to evaluate the combination monalizumab
+ cetuximab versus cetuximab+placebo in R/M SCCHN post platinum and post anti-PD-(L)1 patients.
ii.
Phase 1/2 Clinical Trial in Solid Tumors, including Colorectal Cancer (in combination
with durvalumab) : D419NC00001
Since February 2016, AstraZeneca has been evaluating monalizumab in combination with durvalumab in
a Phase 1/2 clinical trial with up to 381 adults with advanced solid tumor malignancies. The primary
endpoint of the trial is safety, with anti-tumor efficacy being a key secondary endpoint. Other secondary
endpoints include response duration, progression-free survival, overall survival, pharmacokinetics,
pharmacodynamics, and immunogenicity of a monalizumab and durvalumab combination.
• Advanced solid tumors: MSS-CRC
In June 2018, at the annual meeting of the American Society of Clinical Oncology, or ASCO, the trial
investigators presented clinical data showing preliminary anti-tumor activity in patients with R/M MSS-
CRC (MicroSatellite Stables), a population historically unresponsive to PD-(L)1 blockade. 40 patients
92
were evaluable for safety and 39 were evaluable for efficacy. Thirty-five (88%) patients had two or more
prior lines of therapy. The key efficacy data is summarized in the table below.
The safety results of the monalizumab and durvalumab combination from this trial have been consistent
with the monotherapy profiles of each agent. Dose-escalation was completed with no DLTs and the
maximum tolerated dose was not reached.
Based in part on the clinical trial results observed to date, AstraZeneca has decided to pursue additional
exploration cohorts to assess the safety and efficacy of monalizumab in combination with durvalumab in
treating metastatic CRC in first and third line setting.
•
First line MSS-CRC
In the first line setting therapy for advanced and metastatic MSS-CRC, Cohort A1 (DMCB) and A2
(DMCC) are evaluating the combination of durvalumab, monalizumab, standard of care (SoC)
chemotherapy, and either bevacizumab or cetuximab.
In January 2020, AstraZeneca presented at the Gastrointestinal Cancer Symposium (ASCO GI) updated
results from the DMCB cohort and the first report of safety data from cohort A2 (DMCC). Overall safety
profiles were as expected, both the DMCB and DMCC combination regimens had manageable safety
profiles as first-line therapy for advanced/metastatic MSS-CRC. Updated efficacy data continue to show
encouraging antitumor activity and durable responses in the DMCB cohort: the ORR was 41.2% (all
partial responses) and the median duration of response was not reached. Eleven patients (64.7%) had
partial responses or stable disease lasting ≥24 weeks. The DMCB combination regimen has preliminarily
showed encouraging PFS signals.
• Advanced solid tumors: Gynaecological cancer
In December 2020, AstraZeneca presented at the European Society of Gynaecological Oncology (ESGO)
the safety and efficacy results of monalizumab in combination with durvalumab in patients with ovarian,
cervical, or MSS endometrial cancer cohorts. Monalizumab in combination with durvalumab had a
manageable safety profile in all cohorts. Modest clinical activity was demonstrated in patients with
recurrent ovarian cancer; however, activity in cervical and MSS endometrial cancers was minimal.
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Disease control was durable for some patients, lasting ≥24 weeks in 6 (16.2%) patients with ovarian
cancer and 5 (12.8%) patients with MSS endometrial cancer. A patient with ovarian cancer with a small
tumour burden (14 mm) initially responded. Upon oligo-progression after 33 weeks, she received
supportive radiotherapy and remained on treatment from the study for 153 weeks.
f. Main ongoing clinical trial
i.
Head and Neck cancer: Phase 3 INTERLINK-1
INTERLINK-1 represents the first Phase 3 study examining IO approach in R/M SCCHN patients who
have been treated with a platinum-based therapy and PD-(L)1 inhibitor. INTERLINK-1 is a global, multi-
center, randomized, double-blind Phase 3 study of monalizumab and cetuximab versus placebo and
cetuximab. It will enroll approximately 600 patients with recurrent or metastatic head and neck squamous
cell carcinoma of the head and neck (R/M SCCHN) who have been previously treated with platinum-
based chemotherapy and PD-(L)1 inhibitors (“IO-pretreated”). The study is conducted by AstraZeneca.
The primary endpoint is overall survival (OS) with the secondary endpoints being progression-free
survival (PFS), ORR, duration of response (DoR), and safety and quality of life.
ii. Head and Neck cancer: IPH2201-203 study Phase 2 expansion cohort 3
IPH2201-203 is an open-label, Phase 1b/2 clinical trial in combination with cetuximab and/or
durvalumab for patients with R/M SCCHN. It includes a Phase 1b dose-escalation portion and a
Phase 2 portion comprising three expansion cohorts. Expansion Cohort 3 began recruiting in April
2019, enrolled 40 patients, and is evaluating the combination of monalizumab, cetuximab and
durvalumab in IO-naïve patients with R/M SCCHN. This data may inform the design of potential
future clinical trials in early settings, such as first line or locally advanced settings. We estimate that
in the United States, Europe, Japan and China, there are approximately 65,000 and 40,000 patients
in first line and locally advanced settings, respectively.
iii. Phase 1/2 Clinical Trial in Solid Tumors, including Colorectal Cancer (in combination
with durvalumab) : D419NC00001
Dose exploration cohorts are in the process of assessing the safety and efficacy of monalizumab in
combination with durvalumab in first and third line settings when treating metastatic CRC.
g. Partnership
i. AstraZeneca
On April 24 2015, the Company signed a co‑development and commercialization agreement with
AstraZeneca to accelerate and broaden the development of monalizumab. The financial terms of the
agreement include potential cash payments of up to $1.275 billion to Innate Pharma. With the addition of
the $50 million payment triggered by dosing the first patient in the Phase 3 INTERLINK-1 clinical trial,
Innate Pharma has received $400 million to date. AstraZeneca will book all sales and will pay Innate low
double-digit to mid-teen percentage royalties on net sales worldwide except in Europe where Innate
Pharma will receive if it chooses to co-promote the licensed products in certain European countries a 50%
share of the profits and losses in these territories. Should Innate Pharma elect not to co-promote, its share
of profits in Europe will be reduced by a specified amount of percentage points not to exceed the mid-
single digits. Innate will co-fund 30% of the costs of the Phase 3 development program of monalizumab
with a pre-agreed limitation on Innate’s financial commitment.
Avdoralimab (IPH5401), an Anti-C5aR Antibody explored in complement-driven inflammatory
diseases
a. Mechanism of Action and rationale
94
i. Avdoralimab for the Treatment of Inflammatory diseases
Avdoralimab is a first-in-class monoclonal antibody blocking C5a binding to C5aR1. C5a is a key player
in many acute and also chronic inflammatory diseases
The complement system consists of a network of more than 50 different plasma and membrane associated
proteins. It is a part of the innate immune system and plays a key role in host defense against pathogens as
well as in tissue homeostasis. The anaphylatoxin C5a is formed upon cleavage of C5 during the process of
complement activation. C5a is the most potent chemoattractant and induces recruitment and activation of
different immune cells to inflamed tissue, among which are neutrophils, eosinophils, monocytes,
basophils, and mast cells. In addition, release of C5a increases blood vessel permeability, chemokine
release from neutrophils, and expression of adhesion molecules on endothelial cells. All of these
processes facilitate further immune cell recruitment into inflamed tissue and local inflammation.
Unsuitable activation of the complement cascade and production of C5a are associated with inflammatory
conditions. A number of clinical and preclinical scientific publications described the role of this pathway
in several indications and particularly in skin diseases like Hidradenitis Suppurativa, Pyoderma
Gangrenosum, Chronic Spontaneous Urticaria and Bullous Pemphigoid. Furthermore, clinical validation
of C5aR blockade in ANCA vasculitis was demonstrated by avacopan.
The C5a/C5aR pathway involvement in ARDS induced by COVID-19 has been demonstrated: the
exploratory translational study, EXPLORE COVID-19, in collaboration with Innate Pharma, La Timone,
North and Laveran hospitals and the Marseille Immunopôle/AP-HM immunoprofiling laboratory at La
Timone hospital, Marseille, analyzed the immune response of COVID-19 patients at varying stages of
disease and found that patients who progressed towards severe COVID-19 disease exhibit an activation of
the C5a/C5aR1 pathway. More specifically, C5a has been implicated in the pathogenesis of ARDS by
promoting a proinflammatory environment, through the attraction of neutrophils and stimulation of
immune cells such as T and B cells to release cytokines. Avdoralimab blocks C5aR and has the potential
to reduce the inflammatory response in the lungs. Study results were published in Nature on July 29,
2020.
Finally, in terms of differentiation, targeting the C5aR1 provides safety benefit: C5aR1 leaves C5b intact
and preserves the Membrane Attack Complex (MAC), which plays a key role in controlling several
infections. A loss of the MAC would raise safety concerns, as patients often develop comorbid conditions,
such as bacterial infections for which the MAC is required. Patients treated by anti-C5 mab (i.e.
eculizumab) should receive meningococcal vaccines and antimicrobial prophylaxis
ii. Avdoralimab in Oncology
Avdoralimab is designed to bind to and block the C5a receptor, or C5aR, a receptor that is expressed on
MDSCs and neutrophils. Part of the innate immune system, these types of cells promote tumor growth by
secreting inflammatory and angiogenic factors that promote blood vessel growth, potently suppress T
cells and NK cells and hamper the activities of PD-1 checkpoint inhibitors. C5a, a factor in the
complement cascade, is often overexpressed in tumors, where it attracts and activates MDSCs and
neutrophils in the tumor microenvironment, promoting an immunosuppressive environment at the tumor
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bed. The table below shows the percentage of IO-resistant NSCLC patients with more than four times
higher expression of C5 and C5aR1 than NSCLC patients that have not received prior IO treatment.
The image below depicts the mechanism of action of avdoralimab in oncology. Avdoralimab is designed
to bind to C5aR, thereby blocking its ability to bind to C5a. This blocking allows the CD8+ or CD4 T
cells and NK cells, which would otherwise be suppressed by MDSC and neutrophils, to target and kill the
tumor.
Our preclinical studies supported development of avdoralimab in combination with PD-1 checkpoint
inhibitors or other immunotherapies in cancer.
b.
Indications
i.
COVID-19
Experts estimate that there have been over 144 million reported cases of COVID-19 resulting in over 3
million deaths globally. Countries have reported new, more virulent strains of the virus. The pandemic
continues to develop despite available approved and emergency use therapies and the rollout of multiple
vaccines. There is still significant unmet needs for newer agents that target the virus and the associated
inflammatory pathways. There is emerging evidence that the complement pathway plays an integral role
in infection sequela.
ii.
Bullous Pemphigoid (BP)
BP is a chronic, auto-immune, severe inflammatory blistering skin disease with no approved treatments in
the U.S. and Europe. It is a rare disease affecting approximately 1 in 10,000 people in the European
Union (EU) and in the US. The activation of the complement system has been shown to play a crucial role
in the development of the disease. Bullous pemphigoid is a long-lasting debilitating disease because of the
long-term blistering, itching and skin damage which can lead to infection. The disease is primarily treated
with steroids and immunosuppressants which bring with them well known side effects and an
approximately three-fold increase in mortality in the elderly BP patient population.
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iii.
Chronic Spontaneous Urticaria (CSU)
Chronic spontaneous urticaria, formerly also known as chronic idiopathic urticaria and chronic urticaria
(CU), is one of the most frequent skin diseases. At any time, 0.5–1% of the population suffers from the
disease. Although all age groups can be affected, the peak incidence is seen between 20 and 40 years of
age. CSU has major detrimental effects on quality of life, with sleep deprivation and psychiatric
comorbidity being frequent. It also has a large impact on society in terms of direct and indirect health care
costs as well as reduced performance at work and in private life.
In many patients, an underlying cause of CSU cannot be identified, making a causal and/or curative
treatment difficult. Patients are looking for more and better therapies to control their disease. Currently
there are limited approved therapies for patients with CSU: Therefore, the current treatment guidelines for
the management of urticaria recommend the use of non-sedating oral H1-Anti-Histamines as first-line
therapy. In more than 50% of the patients, symptoms persist with standard dosing of antihistamines. In
antihistamine-refractory patients with chronic spontaneous urticaria, the currently only licensed treatment
is omalizumab, a monoclonal anti-IgE antibody. Omalizumab is highly effective in a large proportion of
these patients. There is, however, still a great medical need for additional treatment options, as 20-40% of
patients are still without effective therapy
c. On-going clinical trials
Below is a summary of our ongoing or planned clinical trials of avdoralimab: in COVID-19, Bullous
Pemphigoid, Chronic Spontaneous Urticaria, as well our on-going trial in Oncology
Trial
Status
Sponsor
Phase 2 clinical trial (FORCE)
Ongoing (recruitment
completed)
Phase 2 clinical trial
(ImmunONCOVID-20)
Ongoing
Phase 2 clinical trial (ISS BP
NICE)
Ongoing
Phase 2a clinical trial (CRUSE)
Planned
Hôpitaux
Universitaires de
Marseille – AP
HM
Centre Léon
Bérard, Lyon
CHU Nice
La Charité,
Berlin
Number of
Patients in Trial
208
Indication(s)
Patients with COVID-19
severe pneumonia
219
40
36
Patients with advanced
or metastatic cancer and
SARS-CoV-2 (COVID-
19) infection
Patients with Bullous
Pemphigoid
Adult patients with
chronic spontaneous
urticaria resistant to H1-
antihistamine treatment
Solid Tumors, NSCLC,
HCC
Phase 1/2 clinical trial
(STELLAR-001)
Ongoing (recruitment
completed)
Innate Pharma
Up to 140
i. COVID-19 Phase 2 trials:
Innate has partnered with several France-based hospitals and academic centers to conduct two
development programs in COVID-19:
•
FORCE (FOR COVID-19 Elimination): Based on the findings from EXPLORE COVID-19, a
translational study, the Company launched the FORCE trial in April 2020, sponsored by the
Hôpitaux Universitaires de Marseille – AP HM). A double-blind, randomized phase 2 study
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versus placebo in patients with COVID-19 severe pneumonia. This study consists of 3 cohorts:
cohorts design and respective primary endpoints are presented in the figure below:
This study has been granted the French National Research priority status (CAPNET) which provides a
strong incentive for study execution.
In January 2021, the recruitment of the 3 cohorts has been completed: 208 patients enrolled across 16
sites in France.
•
ImmunONCOVID-20: This prospective, controlled, randomized, multi-center study, sponsored
by the Centre Léon Bérard, Lyon, is exploring monalizumab, avdoralimab, amongst other
treatment arms, to investigate the potential efficacy against COVID 19 in cancer patients with
mild symptoms and pneumonia respectively. Thus, 2 cohorts are active: Patients with mild
symptoms of COVID-19 are included in cohort 1; patients with moderate or severe symptoms are
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included in cohort 2. A total of 219 patients will be included across 16 sites. The study scheme is
presented below:
The primary endpoint is the 28-day survival rate, defined by the proportion of patients still alive 28 days
after randomization. The study started in April 2021 and is currently recruiting.
To fund these 2 clinical trials, and the translational research study EXPLORE COVID-19, Innate Pharma
has obtained public funding of €6.8M under the PSPC-COVID call for projects. This initiative is operated
on behalf of the State by BPI France.
ii.
Phase 2 Bullous Pemphigoid (20-PP-13)
This case-controlled, randomized, open-label, and multicenter Phase 2 clinical trial, sponsored by le
Centre Hospitalier Universitaire de Nice, is investigating avdoralimab in BP patients. This clinical trial
started in October 2020 and is conducted in 4 sites in France. We expect to recruit 40 patients.
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The principal objective is to investigate the clinical efficacy of avdoralimab in addition to superpotent
topical steroids compared to superpotent topical steroids alone in BP patients at 3 months. The study
scheme is presented below:
iii.
Phase 2 Chronic Urticaria Spontaneous (CRUSE)
The CRUSE (Complement 5a Receptor in Chronic Spontaneous Urticaria: A proof of concept study to
characterize safety and effects) trial, sponsored by Charité Universitätsmedizin Berlin, is a multicenter,
randomized, double-blind, placebo-controlled, phase 2. The purpose of this study is to assess the
exploratory efficacy in reducing disease activity and assess the safety of avdoralimab in adult patients
with chronic spontaneous urticaria (CSU) who are symptomatic despite Antihistamine (H1-AH)
treatment. This study has not begun.
iv.
Phase 1/2 clinical trial (STELLAR-001)
In January 2018, we entered into a non-exclusive clinical trial collaboration with AstraZeneca with
respect to avdoralimab. As part of this collaboration, we have conducted a multi-center, open label, dose-
escalation and dose-expansion Phase 1/2 clinical trial (STELLAR-001) to evaluate the safety and efficacy
of avdoralimab in combination with durvalumab, an anti-PD-L1 immune checkpoint inhibitor, as a
treatment for patients with solid tumors, including non-small-cell lung carcinoma (NSCLC), and
hepatocellular carcinoma (HCC) in the United States and in France . The first patient in this clinical trial
was enrolled in September 2018. We expected to enroll up to 140 patients in total.
This trial consists of a dose-escalation part and three expansion cohorts (NSCLC IO-pretreated, HCC IO-
naive and HCC IO-pretreated) in combination with 1,500 mg of durvalumab every 4 weeks. The primary
endpoints of this trial are assessment of DLTs for up to six weeks after treatment and AEs from screening
through up to 30 days after the last dose of trial medication. Secondary endpoints include objective
response rate according to RECIST 1.1, duration of response and progression-free survival. The graphic
below depicts the trial design:
100
We reported preliminary safety data from this clinical trial at the 2019 ESMO annual meeting in the
second half of 2019. This data evaluated 14 patients across four dose levels. Of these patients, six had
NSCLC, five had HCC, two had urothelial carcinoma, or UCC, and one had renal cell carcinoma, or
RCC.
The combination of avdoralimab and durvalumab was well tolerated, and no DLTs were observed, no
dose relationship was observed regarding safety. Finally, pharmacodynamic analyses confirmed full
saturation of the C5a receptors at all dose levels and provided the basis for dose selection for the
expansion cohorts.
We initiated three expansion cohorts to evaluate avdoralimab in combination with durvalumab in IO-
pretreated NSCLC and HCC patients and in IO-naïve HCC patients. However, on September 8th, based
on the data from our cohort expansions, the Company has announced it had decided to stop enrollment in
STELLAR-001.
Note: Pursuant to our agreement, we and AstraZeneca are sharing the costs of this clinical trial on a 50/50
basis.
IPH5201, an Anti-CD39 Antibody Targeting the Immunosuppressive Adenosine Pathway
a. Mechanism & Rationale
i. Mechanism
IPH5201 is a blocking antibody targeting the CD39 immunosuppressive pathway.
CD39 is an extracellular enzyme that is expressed by endothelial cells and immune cells, especially
granulocytes, monocytes, B cells and T regulatory cells. In the tumor microenvironment, CD39 is highly
expressed on both tumor infiltrating immune cells and stromal cells, in several cancer types.
CD39 inhibits the immune system by degrading extracellular adenosine triphosphate (ATP) into
adenosine monophosphate (AMP), that is then further degraded into adenosine by CD73. ATP has
immune-stimulatory activity through promoting the activation of antigen-presenting cells. In contrast,
adenosine has immunosuppressive effects on multiple immune cell types.
IPH5201 inhibits CD39‑mediated hydrolysis of ATP to ADP and AMP. Therefore, inhibition of
CD39‑mediated hydrolysis of ATP by IPH5201 has the potential to promote accumulation of immune-
101
stimulatory ATP and reduce the formation of immunosuppressive adenosine, thereby leading to increased
antitumor immunity across multiple tumor types.
ii. Rationale
Targeting tumor adenosine metabolism is an emerging therapeutic strategy to promote antitumor
immunity. Within the tumor microenvironment, ATP promotes immune-cell mediated killing of cancer
cells, and accumulation of ATP is beneficial for enhancing anti-tumor immune responses. However, ATP
degradation and adenosine accumulation causes immune suppression and dysregulation of immune cells,
which results in the spreading of tumors. IPH5201 is a blocking antibody targeting the CD39
immunosuppressive pathway. By promoting the accumulation of immune-stimulating ATP, and
preventing the production of immune-suppressive adenosine, we believe that the blockade of CD39 may
stimulate anti-tumor activity across a wide range of tumors.
IPH5201 could potentially exhibit a favorable safety and efficacy profile in patients with advanced or
metastatic disease in selected solid tumors, including serving as a candidate for combination treatments
with immune therapeutic agents (ie, PD-L1 targeting durvalumab or CD73-targeting oleclumab).
Inhibition of the PD-L1 and PD-1 immune checkpoint pathway has elicited durable antitumor responses
and long-term remissions in a subset of patients with a broad spectrum of cancers. However, a
considerable proportion of patients remain unresponsive to these treatments (known as innate resistance),
and one-third of patients relapse after initial response (known as adaptive resistance), which suggests that
multiple non-redundant immunosuppressive mechanisms coexist within the tumor microenvironment.
Combined blockade of CD39 and PD-L1, with IPH5201 and durvalumab, respectively, can hypothetically
increase response rates and improve response duration when compared to durvalumab monotherapy by
altering the balance of ATP and adenosine in the tumor microenvironment.
Alternatively, combined blockade of CD39 and CD73, with IPH5201 and oleclumab, respectively, has the
potential to further reduce levels of adenosine and increase ATP levels within the tumor
microenvironment versus blockade of CD39 or CD73 alone, and so could enhance antitumor immunity.
b. Indication
Inhibition of CD39-mediated hydrolysis of ATP by IPH5201 has the potential to promote accumulation of
immune-stimulatory ATP and reduce the formation of immunosuppressive adenosine, thereby leading to
increased antitumor immunity across multiple tumor types.
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c. Non Clinical Development
The rationale is supported by the analysis of anti-tumor immune responses in tumor-challenged CD39
deficient mice and by our non-clinical data for IPH5201 in mouse tumor models .
CD39-deficient mice are more resistant to developing lung or liver metastatic tumors after systemic
challenge with syngeneic B16F10 or MC38 tumor cells (Sun, 2010). Subcutaneous (SC) syngeneic
B16F10 tumors also grew more slowly in CD39‑deficient mice, leading to improved overall survival
versus wild-type mice, and correlated with reduced angiogenesis and improved effector function of tumor
infiltrating T cells in CD39-deficient mice (Jackson, 2007; Sun, 2013). Furthermore, CD39 deficiency
enhanced the anti-tumor activity of PD-1 blocking antibodies alone and in combination with oxaliplatin
chemotherapy in tumor-bearing mice (Perrot, 2019).
Our non-clinical studies demonstrated that IPH5201 effectively targets and inhibits CD39 (soluble and
membrane form) activity, reverses adenosine-mediated T cell suppression, and enhances ATP‑dependent
macrophages and DC activation (adenosine independent). IPH5201 synergized with a mAb against CD73
to restore activation of T cells isolated from cancer patients in vitro.
In syngeneic tumor-bearing human CD39 knock-in mice, we observed that IPH5201 enhanced the
antitumor effects of PD-L1 blockade, as shown in figure below. The four graphs on the left show changes
in tumor volume over time depending on the type of treatment group, which included a control group
(black), an IPH5201 (mouse version) group (blue), an anti-mouse PD-L1 group (orange) and an PD-L1
and IPH5201 combination group (green). The diagram on the right outlines survival rates among these
four treatment groups.
Thus, IPH5201 could potentially exhibit a favorable safety and efficacy profile in patients with advanced
or metastatic disease in selected solid tumors.
d. Ongoing clinical trial
In October 2018, Innate Pharma and AstraZeneca entered into a development collaboration and option
agreement for further co-development and co-commercialization for IPH5201. As part of this
collaboration, a first patient was dosed in a Phase 1 clinical trial (NCT04261075), sponsored by
AstraZeneca, evaluating IPH5201, an anti-CD39 blocking monoclonal antibody, in adult patients with
advanced solid tumors. The purpose of the study is to evaluate IPH5201 as monotherapy and in
combination with durvalumab (anti-PD-L1) and with or without oleclumab (anti-CD73 monoclonal
antibody). This multicenter, open-label, dose-escalation Phase 1 study will evaluate the safety,
tolerability, antitumor activity, pharmacokinetics (PK), pharmacodynamics (PD) and immunogenicity of
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IPH5201 alone, or in combination with AstraZeneca’s anti-PD-L1 therapy, durvalumab, with or without
its anti-CD73 monoclonal antibody, oleclumab.
e. Partnership
In October 2018, Innate Pharma and AstraZeneca entered into a development collaboration and option
agreement for further co-development and co-commercialization for IPH5201. Following the dosing of
the first patient on March 9, 2020 in the IPH5201 Phase 1 clinical trial, AstraZeneca made a $5 million
milestone payment to Innate under the companies’ October 2018 multi-product oncology development
collaboration. Innate made a €2.7 million milestone payment to Orega Biotech SAS pursuant to Innate’s
exclusive licensing agreement.
Preclinical Programs
IPH5301, an Anti-CD73 Antibody Targeting the Immunosuppressive Adenosine Pathway
a. Mechanism & Rationale
Targeting the pathway that metabolizes adenosine triphosphate (ATP) to adenosine in the tumor
microenvironment is an emerging therapeutic strategy to promote antitumor immunity. Within the tumor
microenvironment, extracellular ATP is released by dying cells and has an immune-stimulatory activity,
promoting activation of antigen presenting cells, and a subsequent immune response. The extracelular
enzyme CD39 hydrolyses ATP into adenosine diphosphate (ADP) and adenosine monophosphate (AMP)
in the extracellular space, and CD73 ectonucleotidase (NT5E, ecto-5’-nucleotidase) further metabolizes
AMP to adenosine (Allard, 2016). Adenosine exerts immunosuppressive effects on both the myeloid and
lymphoid compartments (de Andrade Mello et al., 2017).
We are developing IPH5301 (anti-CD73) as a potential anticancer therapy for patients with advanced or
metastatic disease in selected solid tumors. IPH5301 is a monoclonal antibody that selectively binds to
and inhibits the activity of both membrane-bound and soluble human CD73 (NT5E, ecto-5’-nucleotidase).
IPH5301 inhibits CD73-mediated hydrolysis of adenosine monophosphate (AMP) to adenosine. CD73
has been shown to be expressed by tumor cells as well as stromal cells, endothelial cells, B and T
lymphocytes within the tumor microenvironment, and to play a significant role in promoting
immunosuppression through the pathway degrading AMP into adenosine. Therefore, inhibition of
CD73‑mediated hydrolysis of AMP by IPH5301 has the potential to reduce the formation of
immunosuppressive adenosine, thereby leading to increased antitumor immunity across multiple tumor
types, as shown in the figure below.
104
b. Preclinical Development
CD73 immunohistochemistry studies have revealed that in breast, pancreas and ovarian cancer the vast
majority of patients expressed CD73 on either tumor or stromal cells (Wang et al; Oncotarget 2017,
Innate Pharma Internal data). Additionally, high expression of CD73 in tumors has been associated with
poor prognosis in a variety of cancer types : Non-Small Cell Lung Cancer, Prostate cancer, TNBC,
Ovarian cancer, Colorectal cancer, and Gastric cancer (Inoue et al. 2017; Leclerc et al. 2016; Loi et al.
2013; Gaudreau et al. 2016; Wu et al. 2016; Lu et al. 2013).
CD73-deficient mice have been shown to have an increased resistance to the growth of tumors derived
from a variety of certain tumor cell lines, as well as to metastasis (Stagg 2011). These mice were also
resistant to the induction of fibrosarcomas by the carcinogen 3-methylcholanthrene (MCA), as well as to
the continued growth of established MCA-induced tumors(Stagg 2012). Wild type mice showed
decreased tumor growth and metastases in some models when administered with an anti-CD73 antibody
alone (Antonioli, 2016, Antoniolli 2017). The small anti-tumor effect of anti-CD73 antibodies in mouse
models was greatly enhanced by combination with checkpoint inhibition such as PD-1 or an adenosine
receptor antagonist (Allard, 2013; Young, 2016).
We published preclinical data further supporting the rationale of developing IPH5301. IPH5301 blocked
the enzymatic activity of both CD73 expressed at the cell surface and the soluble form of CD73. IPH5301
was able to efficiently restore T cell proliferation inhibited by AMP in vitro. In addition, IPH5301 has
been observed to have a differentiated and superior activity compared to benchmark antibodies that are
currently in clinical development (Perrot, 2019).
In syngeneic tumor-bearing human CD73 knock-in mice, IPH5301 enhanced the antitumor effects of
PD-1 blockade, as shown in figure below. The four graphs show changes in tumor volume over time
depending on the type of treatment group, which included a control group (black), an IPH5301 (mouse
version) group (pink), an anti-mouse PD-1 group (blue) and an PD-1 and IPH5301 combination group
(green).
105
Thus, IPH5301 could potentially exhibit a favorable safety and efficacy profile in patients with advanced
or metastatic disease in selected solid tumors, including serving as a candidate for combination treatments
with chemotherapy or immune therapeutic agents.
IPH6101, NK Cell Engagers
a. Mechanism & Rationale
i. Mechanism
IPH6101/SAR443579 is a NKp46-based NK cell engager (NKCE) using Innate’s proprietary
multispecific antibody format. This format is a trifunctional molecule that co-engage NKp46, the most
specific activating receptor of NK cells, and CD16 on NK cells together with a tumor antigen. It has
shown anti-tumor activity in pre-clinical models, including encouraging pharmacokinetic (PK),
pharmacodynamic (PD) and safety data in preliminary non-human primate studies, as well as positive
manufacturability properties, leading to its selection as a drug candidate for development. Multispecific
monoclonal antibodies, or multispecifics, are antibody-derived formats that can simultaneously bind to
two or more different types of molecules. IPH61 is developed as part of our research collaboration and
licensing agreement with Sanofi for the generation and evaluation of up to two NKp46 NKCEs, using
Sanofi’s technology and tumor targets and our NK cell engager technology.
ii. Rationale
Multispecific monoclonal antibodies, or multispecifics, are antibody-derived formats that can
simultaneously bind to two or more different types of molecules. A number of studies of bispecific
antibodies are currently underway, such as those assessing the safety and efficacy of bispecific T cell
engagers, such as BiTEs, which engage T cells via the antigen receptor on one-side of the bispecific T cell
engager, and a tumor antigen on the other side of the BiTE. These molecules have demonstrated the
ability to reduce or slow the growth of tumors in cancer patients, but also carry a significant toxicity risk.
This toxicity risk occurs by engaging all T cells, irrespective of their specificity and development status,
potentially leading to an overt production of cytokines by these T cells, referred to as a cytokine storm. In
parallel, bispecific killer cell engagers, or BiKEs, that engage CD16 receptors found on NK cells, and
trispecific killer cell engagers, or TriKEs, that engage CD16 receptors and contain IL-15, a cytokine that
promotes NK cell activation and survival, have also been developed to target antigens expressed on solid
tumors. BiKEs and TriKEs can be effective both in vitro and in vivo in preclinical models. These
multispecific molecules that engage NK cells could reduce the risks associated with toxicity, as NK cell
counts only represent approximately 10% of T cell counts, thereby potentially limiting the likelihood of
inducing a cytokine storm. However, it remains unclear whether these multifunctional CD16 engager
antibodies can activate NK cells in solid tumors since they often express low levels of CD16.
Innate Pharma has developed a proprietary NKCE multi-specific technology platform that induces potent
and specific engagement of NK cells against tumors by bridging together NKp46, the most NK cell
specific activating receptor, and CD16, on NK cells and a tumor-antigen on the tumor cell. Because
NKp46 is expressed on all NK cells and conserved on tumor infiltrating NK cells, and NK cells are not
expected to produce a cytokine storm, NKCE may overcome the limitations of both ADCC-inducing
antibodies and T cell engagers.
b. Preclinical Development
In our preclinical studies, we observed that NKp46 NKCEs have stronger anti-tumor activity as compared
to preclinical findings from other approved anti-tumor therapeutic antibodies, such as rituximab, Fc-
enhanced obinutuzumab and cetuximab. Additionally, preclinical results indicate that trifunctional
NKCEs promoting NKp46 and CD16 receptors simultaneously with the same molecule are more potent
than a mixture of bispecific reagents activating NKP46 and CD16 separately, and can efficiently promote
106
NK cell mediated tumor cell lysis without inducing potentially toxic off-target effects. We believe these
results support the clinical development of NKCEs for cancer immunotherapy, as a complement to
existing immuno-oncology approaches.
c. Partnership
i. Sanofi
Under the terms of the agreement, Sanofi is responsible for the development, manufacturing and
commercialization of products resulting from the research collaboration. We are eligible to receive
payments of up to €400.0 million primarily upon the achievement of development and commercial
milestone as well as royalties ranging from a mid to high single-digit percentage on net sales.
In January 2021, it was announced that Sanofi has made the decision to progress IPH6101/SAR443579
into investigational new drug (IND)-enabling studies. Selection of IPH6101/SAR443579 triggered a €7M
milestone payment to Innate.
Additional Preclinical Programs
We have a robust pipeline of additional preclinical product candidates. Within our additional preclinical
pipeline, four programs are being developed under an option agreement with AstraZeneca including
IPH43, an anti-MICA/B antibody drug conjugate, the anti-Siglec-9 antibody program, and two other
programs with undisclosed targets: a multi-specific NKp46-NKCE platform (IPH62) and IPH25, a
checkpoint inhibitor. We develop other programs in collaboration with Sanofi (NKp46 NKCE IPH64) or
as proprietary programs (NKp46 NKCE IPH65 and IPH45).
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Next Steps
Lumoxiti, a First-in-Class, Marketed Product In-Licensed from AstraZeneca for the Treatment of
Hairy Cell Leukemia
Lumoxiti (moxetumomab pasudotox-tdfk) is a marketed, first-in-class CD22-directed cytotoxin for the
treatment of HCL and was approved by the FDA after priority review in September 2018 as a treatment
for adult patients with R/R HCL who have received at least two prior systemic therapies, including
treatment with a purine nucleoside analog, or PNA. Lumoxiti has been granted orphan drug designation
by the FDA for the treatment of HCL.
HCL is a rare, chronic and slow-growing leukemia in which the bone marrow over-produces abnormal B
cell lymphocytes. Untreated, HCL can result in serious conditions, including infections, bleeding, anemia
and potentially may lead to death. Approximately 1,000 people are diagnosed with HCL in the United
States each year. HCL accounts for up to 3% of all adult leukemias. While many patients initially respond
to treatment, approximately 30-40% will relapse within five to ten years after their first treatment.
To date, Lumoxiti is the only approved drug in the United States for patients in third line or later
treatment.
We in-licensed commercial rights to Lumoxiti in the United States and European Union from
AstraZeneca in 2018. As part of our agreement with AstraZeneca, we have a collaborative and staged
transition for the Lumoxiti program. Since the end of the fourth quarter of 2019, we have become the
primary commercial entity promoting Lumoxiti, having transitioned all sales and medical affairs
activities, including medical science liaisons and sales representatives, from AstraZeneca to us. In March
2020, we transitioned the BLA from AstraZeneca to us and became Marketing Authorization holder in the
United States. In October 2020, we completed the last US transition milestone : we put into operation our
distribution channel.
In December 2020, the Committee for Medicinal Products for Human Use (CHMP) of the European
Medicines Agency (EMA) adopted a positive opinion for LUMOXITI® (moxetumomab pasudotox), for
the treatment of adult patients with relapsed or refractory (r/r) hairy cell leukemia (HCL) who have
received at least two prior systemic therapies, including treatment with a purine nucleoside analog.
108
In December 2020 , we announced that we will no longer pursue Lumoxiti commercialization activities in
the United States or European Union and returned the commercialization rights to AstraZeneca in order
to re-focus investments in our R&D portfolio. We determined that there is low strategic value for us to
maintain Lumoxiti in our portfolio due to lower than anticipated product sales, further compounded by the
ongoing COVID-19 pandemic.
We are currently discussing a transition plan with AstraZeneca, including shifting the costs and
transferring the US marketing authorization and distribution of Lumoxiti back to AstraZeneca in 2021.
AstraZeneca will remain the marketing authorization applicant for the EU filing.
Competition
The biotechnology and pharmaceutical industry, and notably the cancer field, is characterized by rapidly
advancing technologies, products protected by intellectual property rights and intense competition and is
subject to significant and rapid changes as researchers learn more about diseases and develop new
technologies and treatments. While we believe that our technology, knowledge, experience,
collaborations and scientific resources provide us with competitive advantages, we face potential
competition from many different sources, including major pharmaceutical, specialty pharmaceutical and
biotechnology companies, academic institutions, governmental agencies and public and private research
institutions. Any approved product that we commercialize will compete with existing therapies and new
therapies that may become available in the future.
There are a large number of companies developing or marketing treatments for cancer, including many
major pharmaceutical and biotechnology companies. Many of our competitors have significantly greater
experience, personnel and resources as it relates to research, drug development, manufacturing and
marketing. In particular, large pharmaceutical laboratories have substantially more experience than we do
in conducting clinical trials and obtaining regulatory authorizations. Mergers and acquisitions in the
pharmaceutical, biotechnology and diagnostic industries may result in even more resources being
concentrated among a smaller number of our competitors. Smaller or early-stage companies may also
prove to be significant competitors, particularly through collaborative arrangements with large and
established companies. These competitors are also likely to compete with us to recruit and retain top
qualified scientific and management personnel, acquire rights for promising product candidates and
technologies, establish clinical trial sites and patient registration for clinical trials, acquire technologies
complementary to, or necessary for, our programs and enter into collaborations with potential partners
who have access to innovative technologies.
Our commercial opportunity could be reduced or eliminated if our competitors develop and
commercialize products that are more effective, have a better safety profile, are more convenient, have a
broader label, have more robust intellectual property protection or are less expensive than any products
that we may develop. Our competitors also may obtain regulatory approval for their products more
rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong
market position before we are able to enter the market. In addition, our competitors could be more
efficient in manufacturing or more effective in marketing their own products than we or our partners may
be in the future.
With respect to our lead product candidate lacutamab, our monoclonal antibody product candidate
targeting KIR3DL2, we are aware of several pharmaceutical companies marketing and developing
products for the treatment of patients with CTCL, including MF and Sézary syndrome, and PTCL. Two
new drugs have been recently approved by the FDA for CTCL: Adcetris (brentuximab vedotin), marketed
by Seattle Genetics and approved in combination with chemotherapy for treatment of patients with
primary cutaneous anaplastic large cell lymphoma (pcALCL) or CD30-expressing MF who have received
prior systemic therapy, and Poteligeo (mogamulizumab), marketed by Kyowa Kirin and approved for the
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treatment of adult patients with R/R MF or Sézary syndrome after at least one prior systemic therapy.
Zolinza (vorinostat) is the only drug approved by the FDA for CTCL patients after two prior failures. In
the second line setting of PTCL, Beleodaq (belinostat), Folotyn (pralatrexate) and Istodax (romidepsin)
have all been approved by the FDA; however, none of these treatments have been approved by the EMA.
With respect to monalizumab, a novel dual-targeting checkpoint inhibitor, there are several
pharmaceutical companies marketing and developing treatments for either SCCHN or MSS-CRC. For
SCCHN, Erbitux (cetuximab), marketed by Eli Lilly, and checkpoint inhibitors Opdivo (nivolumab) and
Keytruda (pembrolizumab), marketed by Bristol-Myers Squibb and Merck, respectively, have all been
approved in the second line setting.
There are also several pharmaceutical and biotechnology companies that are focused on the tumor
microenvironment, including the complement and the adenosine pathways. The C5a and C5aR pathways
have attracted efforts in inflammation including COVID-19, such as InflaRx N.V. and Chemocentryx.
Many companies are active in the adenosine pathway, targeting CD73, CD39 or the adenosine receptors.
For example, Bristol-Myers Squibb and AstraZeneca each have anti-CD73 product candidates in clinical
development, and several other biotechnology companies are active in the adenosine pathway area,
including Tizona Therapeutics, Inc., AbbVie Inc., Corvus Pharmaceuticals, Inc., Arcus Biosciences, Inc.
and Surface Oncology, Inc.
NK cells have been increasingly researched and we are aware of many companies addressing NK cells
through different approaches such as cell therapies (Fate Therapeutics, Inc., NantKwest, Inc.) and
multispecifics (Affimed N.V., Dragonfly Therapeutics, Inc.)
Intellectual Property
Our commercial success depends in part on obtaining and maintaining patent, trade secret and other
intellectual property and proprietary protection of our technology, current and future products and product
candidates and methods used to develop and manufacture them. We cannot be sure that patents will be
granted with respect to any of our pending patent applications or to any patent applications filed by us in
the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in
the future will be sufficient to protect our technology or will not be challenged, invalidated or
circumvented. Our success also depends on our ability to operate our business without infringing,
misappropriating or otherwise violating any patents and other intellectual property or proprietary rights of
third parties.
We rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be
difficult to protect. We seek to protect our trade secrets, in part, by confidentiality agreements with our
employees, consultants, scientific advisors and contractors. These agreements may not provide
meaningful protection or may be breached, and we may not have an adequate remedy for any such
breach. We also seek to preserve the integrity and confidentiality of our data and trade secrets by
maintaining physical security of our premises and physical and electronic security of our information
technology systems. Notwithstanding these measures, these agreements and systems may be breached,
and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise
become known or be independently discovered by competitors or misused by collaborators to whom we
disclose such information. Despite measures taken to protect our intellectual property, unauthorized
parties may attempt to copy aspects of our products or drug candidates or obtain or use information that
we regard as proprietary. As a result, we may be unable to meaningfully protect our trade secrets and
proprietary information. To the extent that our employees, consultants, contractors or partners use
intellectual property owned by others in their work for us, disputes may arise as to the rights in related or
resulting know-how and inventions. For more information regarding the risks related to intellectual
property, please see “Risk Factors—Risks Related to Intellectual Property Rights.”
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Patents
We file patent applications to protect our product candidates, technical processes and the processes used
to prepare our product candidates, the compounds or molecules contained in these product candidates and
medical treatment methods. We also license rights to patents owned by third parties, academic partners or
other companies in our field.
Moxetumomab pasudotox-tdfk (Lumoxiti)
As of December 31, 2020, the principal intellectual property rights related to moxetumomab pasudotox
are in-licensed from AstraZeneca and include U.S. Patent No. 10,072,083 and its counterpart European
patent EP 3 434 346 B1, which are directed to the composition of matter of moxetumomab pasudotox.
These patents have a statutory expiration date in 2031, not including patent term adjustment or any
potential patent term extension.
Monalizumab/IPH22
As of December 31, 2020, the principal intellectual property rights related to monalizumab are in-licensed
from Novo Nordisk A/S and include U.S. Patent Nos. 8,206,709 and 8,901,283, European patents EP 2
038 306 B1 and EP 2 426 150 B1 and counterpart patents in certain other countries. These patents are
directed to the composition of matter of monalizumab and have a statutory expiration date in 2027, not
including patent term adjustment or any potential patent term extension.
Lacutamab/Anti-KIR3DL2
As of December 31, 2020, the principal intellectual property rights related to lacutamab are wholly owned
by us and include U.S. Patent No. 10,280,222, European patent EP 3 116 908 B1 and counterpart patent
applications in certain other countries. These patents and patent applications are directed to the
composition of matter of lacutamab, and such patents have, and any patents that issue from such
applications would have, a statutory expiration date in 2035, not including patent term adjustment or any
potential patent term extension.
Avdoralimab /Anti-C5aR
As of December 31, 2020, the principal intellectual property rights related to avdoralimab are in-licensed
from Novo Nordisk A/S and include U.S. Patent Nos. 8,613,926, 8,846,045 and 10,323,097, European
patents EP 2 718 322 B1 and EP 3 424 953 B1counterpart patents and patent applications in certain other
countries. These patents and patent applications are directed to the composition of matter of avdoralimab,
and such patents have, and any patents that issue from such applications would have, a statutory
expiration date in 2032, not including patent term adjustment or any potential patent term extension.
IPH5201/Anti-CD39
As of December 31, 2020, the principal intellectual property rights related to IPH5201 are wholly owned
by us and include one U.S. non-provisional patent application, one European patent application, and other
patent applications in certain other countries. If a patent directed to IPH5201 issues from such U.S. patent
application, it would have a statutory expiration date in 2039, not including patent term adjustment or any
potential patent term extension.
The term of individual patents depends upon the legal term of patents in the countries in which they are
obtained. In most countries, including the United States, the patent term is 20 years from the earliest
claimed filing date of a non-provisional patent application or its foreign equivalent in the applicable
country. In the United States, a patent’s term may, in certain cases, be lengthened by patent term
adjustment, which compensates a patentee for administrative delays by the USPTO in examining and
granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent
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or a patent naming a common inventor and having an earlier expiration date. In the United States, a patent
may also be eligible for limited patent term extension under the Drug Price Competition and Patent Term
Restoration Act of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a
patent extension term of up to five years as compensation for patent term lost during the FDA regulatory
review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14
years from the date of product approval, only one patent applicable to each regulatory review period may
be extended and only those claims covering the approved drug, a method for using it, or a method for
manufacturing it may be extended.
Trademarks
We own the mark INNATE PHARMA in the United States, Australia and Europe (EU community
trademark), and INNATE in Europe (EU community trademark). We also own the mark LUMOXITI and
a figurative mark associated with the Lumoxiti product in the United States, Europe (EU community
trademark) and other countries throughout the world. LUMOXITI trademarks will be returned to
AstraZeneca further to termination of Lumoxiti License Agreement.
Regulation
Research and development work, preclinical tests, clinical studies, facilities, and the manufacture and sale
of our products are and will continue to be subject to the complex legislative and regulatory provisions
implemented by the various public authorities in Europe, the United States and other countries. The EMA,
FDA and the various national regulatory authorities impose considerable constraints on the development,
manufacture and sale of products that we develop and clinical trials we conduct. In case of non-
compliance with these regulations, the regulatory authorities may impose fines, seize or remove products
from the market or even partially or totally suspend their production. They may also revoke previously
granted marketing authorizations, reject authorization applications. These regulatory constraints are
important in considering whether an active ingredient can ultimately become a drug, as well as for
recognizing the time and investments necessary for such development.
Although there are differences from one country to another, the development of therapeutic products for
human use is subject to similar procedures and must comply with the same types of regulations in all ICH
countries (countries part of the International Council for Harmonisation of Technical Requirements for
Registration of Pharmaceuticals for Human Use). In order to obtain marketing authorization for a product,
proof of its efficacy and safety should be provided by the applicant, along with detailed information on its
composition and manufacturing process. This entails significant pharmaceutical and preclinical
developments, clinical trials and laboratory tests. The development of a new drug from fundamental
research to marketing comprises five steps: (i) research, (ii) preclinical trials, (iii) clinical trials in
humans, (iv) marketing authorization and (v) marketing.
Preclinical studies
Preclinical studies include laboratory evaluation of the purity and stability of the manufactured substance
or active pharmaceutical ingredient and the formulated product, as well as in vitro and animal studies to
assess the safety and activity of the product candidate for initial testing in humans and to establish a
rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and
requirements, including Good Laboratory Practices (GLP) regulations. The results of the preclinical tests,
together with manufacturing information, analytical data, any available clinical data or literature and plans
for clinical studies, among other things, are submitted to the applicable regulatory agency in connection
with the application to begin human testing. Some long-term preclinical testing, such as animal tests of
reproductive adverse events and carcinogenicity, and long-term toxicity studies, may continue after
submission of the application.
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Regulation of clinical trials
In humans, clinical trials are usually carried out in three phases that are generally sequential, but under
unique circumstances phases of trials can overlap or even be skipped, following a specific review and
determination by regulatory agencies. Clinical trials are sometimes necessary after marketing
authorization to explain certain side-effects, investigate a specific pharmacological effect, obtain more
accurate or additional data. Additional trials are also commonly conducted to explore new indications.
Regulatory authorization is needed to carry out clinical trials. The regulatory authorities may block,
suspend or require significant modifications to the clinical study protocols submitted by companies
seeking to test products.
Clinical trial authorization in the European Union
The current regulation relating to clinical trials is governed by European Directive 2001/20/EC of April 4,
2001 on clinical trials, which has been transposed into national legislation by all European Union Member
States.
The 2001 Directive cited above has been revised and replaced by the Clinical Trials Regulation EU No.
536/2014 of April 16, 2014, which aims at harmonizing and streamlining the clinical trials authorization
process. The Clinical Trial Regulation EU No. 536/2014 of April 16, 2014 entered into force on June 16,
2014. However, the new regulation will become applicable six months after the European Commission
publishes notice of the confirmation of full functionality of the EU Clinical Trials Information System.
Therefore the Clinical Trials Regulation is expected to come into application in the course of 2022. It will
apply to interventional clinical trials on medicinal products and to clinical trials authorized under the
current 2001 Directive still ongoing three years after the Clinical Trial Regulation has come into
operation.
The Clinical Trial Regulation will allow better consistency throughout EU Member States:
•
•
Single submission of the clinical trial application dossier through the EU Clinical Trials
Information System (Article 5) including a common part assessed jointly by all participating
EU Member States, and a national part covering the ethical and operational aspects of the trial
assessed by each EU Member State independently.
A clinical trial authorization will be issued in the form of a single decision by each EU
Member State concerned (Article 4).
The Clinical Trials Regulation will apply in the Member States without the requirement for separate
implementing legislation by each Member State, but some of the existing laws of the Member States
applicable at a national level will continue to apply.
This new regulation will also increase transparency of authorized clinical trials in the European Union:
the EU Clinical Trials Information System will serve as the source of public information, without
prejudice of personal data protection, commercially confidential information protection, and protection of
confidential communication and trial supervision between Member States. Public information will include
clinical trial authorization information, protocol data, and a summary of the results 12 months after the
end of the trial (or six months in case of pediatric clinical trials).
Clinical trial authorization in the United States
In the United States, an Investigational New Drug application, or IND, must be submitted to the FDA and
accepted before clinical trials can start on humans. An IND is an exemption from the Federal Food, Drug,
and Cosmetic Act, or FDCA, that allows an unapproved product candidate to be shipped in interstate
commerce for use in an investigational clinical trial and a request for FDA authorization to administer an
investigational product to humans. This application contains early research data as well as the
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pharmaceutical dossier, preclinical and clinical data (if any) and includes the clinical protocol. If there is
no objection from the FDA, the IND application becomes valid 30 days after it is received by the FDA.
This waiting period is designed to allow the FDA to review the IND to determine whether human
research subjects will be exposed to unreasonable health risks. At any time during or subsequent to this
30-day period, the FDA may request the suspension of clinical trials, whether such trials are planned or in
progress, and request additional information. This temporary suspension continues until the FDA receives
the information it has requested.
In addition to the foregoing IND requirements, an independent institutional review board, or IRB,
representing each institution participating in the clinical trial must review and approve the plan for any
clinical trial before it commences at that institution, and the IRB must conduct continuing review and
reapprove the study at least annually. The IRB must review and approve, among other things, the study
protocol and informed consent information to be provided to study subjects. An IRB must operate in
compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its
institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the
IRB’s requirements or if the product candidate has been associated with unexpected serious harm to
patients.
The FDA’s primary objectives in reviewing an IND are to assure the safety and rights of patients and to
help assure that the quality of the investigation will be adequate to permit an evaluation of the biological
product’s safety, purity and potency. The decision to terminate development of an investigational
biological product may be made by either a health authority body such as the FDA, an IRB, or by us for
various reasons. Additionally, some trials are overseen by an independent group of qualified experts
organized by the trial sponsor, known as a data safety monitoring board or committee. This group
provides authorization for whether or not a trial may move forward at designated check points based on
access that only the group maintains to available data from the study. Suspension or termination of
development during any phase of clinical trials can occur if it is determined that the participants or
patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination
may be made by us based on evolving business objectives and/or competitive climate.
Good clinical practices (GCP)
In most countries, clinical trials must comply with the current GCP (cGCP) standards as defined by the
International Council for Harmonization of Technical Requirements for Registration of Pharmaceuticals
for Human Use, or ICH. Directive 2005/28/EC dated April 8, 2005 adopted the cGCP principles in the
context of strengthening the regulatory structure specified by Directive 2001/20/EC. The competent
authority designated in each Member Country to authorize clinical trials must take into consideration,
among other factors, the scientific value of the study, the safety of the participants and the possible
responsibility of the clinical site.
Conducting clinical trials
Clinical trials must be carried out in compliance with complex regulations throughout the various phases
of the process, based on the principle of informed consent by the patient to whom the products will be
administered.
Clinical trial phases
Clinical trials may be conducted in the United States, in Europe or in other parts of the world as long as
such trials have been approved by health authorities and ethics committees in each country where the trial
is conducted. There are three well-established and internationally-recognized clinical phases: Phase I, II
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and III. This classification is used by the FDA and the EMA, as well as other regulatory agencies. Each of
these clinical phases is described below.
•
•
•
Phase I: The product candidate is initially introduced into healthy human subjects and tested
for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of
some products for severe or life-threatening diseases, such as cancer, especially when the
product may be too inherently toxic to ethically administer to healthy volunteers, the initial
human testing is often conducted with patients. Sponsors sometimes designate their Phase I
trials as Phase Ia or Phase Ib. Phase Ib trials are typically aimed at confirming dosing,
pharmacokinetics and safety in larger number of patients. Some Phase Ib studies evaluate
biomarkers or surrogate markers that may be associated with efficacy in patients with specific
types of diseases.
Phase II: This phase involves clinical trials in a limited patient population to identify possible
adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for
specific targeted diseases and to determine dosage tolerance and appropriate dosage.
Phase III: Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety
in an expanded patient population at geographically dispersed clinical study sites. These
clinical trials, generally comparative, are intended to establish the overall risk-benefit ratio of
the product candidate and provide, if appropriate, an adequate basis for product labeling.
Post-approval trials, sometimes referred to as Phase IV studies, may be conducted after initial marketing
approval. These trials are used to gain additional experience from the treatment of patients in the intended
therapeutic indication. In certain instances, the applicable regulator may mandate the performance of
Phase IV clinical trials as a condition of approval.
In specific situations, certain phases of development can be merged or even skipped when clear signs of
efficacy emerge in the early phases of development and the product candidate is designed for patients
with major unmet medical needs. However, these deviations from the standard pattern of development
must be discussed and approved by health authorities. Given the high unmet medical need for certain
cancer patients, deviations from the typical phases of development are frequent in oncology and
particularly in the field of immunotherapy.
Disclosure of clinical trial information
Sponsors of clinical trials of FDA-regulated drugs are required to register and disclose certain clinical trial
information, which is publicly available at www.clinicaltrials.gov. Information related to the product,
patient population, phase of investigation, study sites and investigators, and other aspects of the clinical
trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of
their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new
product or new indication being studied has been approved. Competitors may use this publicly available
information to gain knowledge regarding the progress of development programs.
Regulations concerning marketing authorizations
In order to be marketed, a drug product must have regulatory authorization (known as approval of a New
Drug Application, or NDA, or a Biologics License Application, or BLA, in the United States and a
Marketing Authorization Application, or MAA, in the European Union). The competent authorities are
the FDA in the United States and the EMA in Europe. Companies apply for an NDA/BLA or an MAA
based on quality, safety and efficacy. In Europe, the United States and Japan, the dossier is a standard
dossier referred to as a CTD, or Common Technical Document. The file relating to the NDA/BLA/MAA
describes the manufacturing of the active substance, the manufacturing of the final product and the
clinical and non-clinical studies.
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United States review and approval process for biological products
In the United States, the FDA approves complex biological products under the Public Health Service Act,
or PHSA. In order to obtain approval to market a biological product in the United States, a marketing
application must be submitted to the FDA that provides data establishing the safety, purity and potency of
the proposed biological product for its intended indication. The application includes all relevant data
available from pertinent preclinical and clinical trials, including negative or ambiguous results as well as
positive findings, together with detailed information relating to the product’s chemistry, manufacturing,
controls and proposed labeling, among other things. Data can come from company-sponsored clinical
trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative
sources, including studies initiated by investigators. To support marketing approval, the data submitted
must be sufficient in quality and quantity to establish the safety, purity and potency of the biological
product to the satisfaction of the FDA.
The BLA is thus a vehicle through which applicants formally propose that the FDA approve a new
biological product for marketing and sale in the United States for one or more indications. Every new
biological product candidate must be the subject of an approved BLA before it may be commercialized in
the United States. Under federal law, the submission of most BLAs is subject to an application user fee
and the sponsor of an approved BLA is also subject to annual program user fees. These fees are typically
increased annually. Certain exceptions and waivers are available for some of these fees, such as an
exception from the application fee for products with orphan designation and a waiver for certain small
businesses, an exception from the establishment fee when the establishment does not engage in
manufacturing the product during a particular fiscal year, and an exception from the product fee for a
product that is the same as another product approved under an abbreviated pathway.
Following submission of a BLA, the FDA conducts a preliminary review of the application generally
within 60 calendar days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s
receipt of the submission of whether the application is sufficiently complete to permit substantive review.
The FDA may request additional information rather than accept the application for filing. In this event,
the application must be resubmitted with the additional information. The resubmitted application is also
subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA
begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review
process of BLAs. Under that agreement, 90% of applications seeking approval of New Molecular
Entities, or NMEs, are meant to be reviewed within ten months from the date on which FDA accepts the
application for filing., and 90% of applications for NMEs that have been designated for “priority review”
are meant to be reviewed within six months of the filing date. For applications seeking approval of
products that are not NMEs, the ten-month and six-month review periods run from the date that FDA
receives the application. The review process and the Prescription Drug User Fee Act goal date may be
extended by the FDA for three additional months to consider new information or clarification provided by
the applicant to address an outstanding deficiency identified by the FDA following the original
submission.
Before approving an application, the FDA typically will inspect the facility or facilities where the product
is or will be manufactured. These pre-approval inspections may cover all facilities associated with a BLA
submission, including component manufacturing, finished product manufacturing, and control testing
laboratories. The FDA will not approve an application unless it determines that the manufacturing
processes and facilities are in compliance with cGMP requirements and adequate to assure consistent
production of the product within required specifications. Additionally, before approving a BLA, the FDA
will typically inspect one or more clinical sites to assure compliance with GCP. In addition, as a condition
of approval, the FDA may require an applicant to develop a Risk Evaluation and Mitigation Strategy, or
REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the
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benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA
will consider the size of the population likely to use the product, seriousness of the disease, expected
benefit of the product, expected duration of treatment, seriousness of known or potential adverse events,
and whether the product is a new molecular entity.
The FDA may refer an application for a novel product to an advisory committee or explain why such
referral was not made. Typically, an advisory committee is a panel of independent experts, including
clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to
whether the application should be approved and under what conditions. The FDA is not bound by the
recommendations of an advisory committee, but it considers such recommendations carefully when
making decisions.
On the basis of the FDA’s evaluation of the application and accompanying information, including the
results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a
complete response letter. An approval letter authorizes commercial marketing of the product with specific
prescribing information for specific indications. A complete response letter generally outlines the
deficiencies in the submission and may require substantial additional testing or information in order for
the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s
satisfaction in a resubmission of the BLA, the FDA will issue an approval letter. The FDA has committed
to reviewing such resubmissions in two or six months depending on the type of information included.
Even with submission of this additional information, the FDA ultimately may decide that the application
does not satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that
contraindications, warnings or precautions be included in the product labeling, require that post-approval
studies, including Phase 4 clinical trials, be conducted to further assess the product’s safety after approval,
require testing and surveillance programs to monitor the product after commercialization, or impose other
conditions, including distribution restrictions or other risk management mechanisms, including REMS,
which can materially affect the potential market and profitability of the product. The FDA may prevent or
limit further marketing of a product based on the results of post-marketing studies or surveillance
programs.
Registration procedures in Europe
To access the European markets through community procedures, drug products must be submitted
through the Centralized Procedure, the Mutual Recognition Procedure or the Decentralized Procedure.
The process for doing this depends, among other things, on the nature of the medicinal product.
Regulation (EC) No 726/2004 of the European Parliament and of the Council of March 31, 2004 provides
for the Centralized Procedure. The Centralized Procedure results in a single marketing authorization
(MA), granted by the European Commission that is valid across the European Economic Area or EEA
(i.e., the European Union as well as Iceland, Liechtenstein and Norway). The Centralized Procedure is
compulsory for human drugs that are: (i) derived from biotechnology processes, (ii) contain a new active
substance indicated for the treatment of certain diseases, such as cancer, HIV/AIDS, diabetes,
neurodegenerative diseases, autoimmune and other immune dysfunctions and viral diseases, (iii) officially
designated orphan medicines and (iv) advanced-therapy medicines, such as gene therapy, somatic cell
therapy or tissue-engineered medicines.
Under Article 3 of the Regulation (EC) No 726/2004, the Centralized Procedure is optional for any other
human medicinal product if: (1) the medicinal product contains a new active substance ; or (2) the
applicant shows that the medicinal product constitutes a significant therapeutic, scientific or technical
innovation or that the granting of authorization in accordance with this Regulation is in the interests of
patients health at EU level.
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Under the Centralized Procedure in the European Union, the European Medicines Agency (EMA), shall
ensure that the opinion of the Committee for Medicinal Products for Human Use (CHMP), is given within
210 days (Article 6.3). This excludes so-called clock stops, during which additional written or oral
information is to be provided by the applicant in response to questions asked by the CHMP (Article 7). At
the end of the review period, the CHMP provides its opinion through a scientific assessment report to the
European Commission. The Commission may then adopt a final decision to grant an MA. Once granted,
the MA is valid across all EEA countries for an initial period of five years. Since 2008, as a consequence
of a European directive, a marketing authorization is now renewed only once, five years after the initial
registration. The marketing authorization shall be then valid for an unlimited period, unless the
Commission decides, on justified grounds, relating to pharmacovigilance, to proceed with one additional
five-year renewal.
National MAs, issued by the competent authorities of the member states of the EEA, are also available;
however these only cover their respective territory. National MAs may be applied for through the Mutual
Recognition Procedure or Decentralized Procedure in order that multiple competent authorities in
different member states of the EEA may each issue a national MA in their territory for the same product
on the back of the same application. National MAs are only available for products not falling within the
mandatory scope of the Centralized Procedure.
It is possible for a drug to be withdrawn from the market, upon the request of the health authorities, if a
serious problem arises, in particular a safety-related problem. The marketing authorization is then
cancelled. There can be various reasons for the withdrawal of drugs from the market, with the main
reasons being public health, major undesirable side effects and non-compliance with manufacturing rules.
Non-standard registration procedures
Aside from the standard procedures of granting a BLA or a European MA, as described above, there are
non-standard registration procedures that allow a shorter time-to-market for new medicines.
The following expedited approval programs are in place in the United States:
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The Accelerated Approval is a program that is intended to make promising products for life
threatening diseases available on the market on the basis of preliminary evidence prior to
formal demonstration of patient benefit. The FDA evaluation is performed on the basis of a
surrogate marker (a measurement intended to substitute for the clinical measurement of
interest) that is considered likely to predict patient benefit. A result of substitution or marker
(“surrogate endpoint”) is a result of laboratory or physical sign that is not in itself a direct
measure of the patient’s feelings, its functions or survival, but which allows to anticipate a
therapeutic benefit. The approval that is granted may be considered as a provisional approval
with a written commitment to complete clinical studies that formally demonstrate patient
benefit. This procedure is equivalent to the “conditional approval” in Europe.
The Priority Review is given to drugs that offer major advances in treatment, or provide a
treatment where no adequate therapy exists. A Priority Review means that the time it takes
FDA to review a new drug application is reduced to six months rather than 10 months. This
procedure is equivalent to the “accelerated approval” in Europe.
The Fast Track Program refers to a process for interacting with FDA to facilitate the
development and expedite the review of new drugs that are intended to treat serious or life-
threatening conditions and that demonstrate the potential to address unmet medical needs. The
advantages of this process include scheduled meetings to seek FDA input into clinical
development plans and to collect appropriate data that will be needed to support approval. Fast
Track designation does not necessarily lead to a Priority Review or Accelerated Approval.
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The Breakthrough Therapy Designation is aimed at accelerating the development and
examination of drugs which are intended to treat serious illnesses and where the preliminary
clinical evidence indicates that the drug may exhibit a substantial improvement over the
available therapies with regard to clinically significant criterion (criteria).
A drug which is given the designation “Breakthrough Therapy” can benefit from the following:
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All of the features of the designation “Fast Track”;
Intensive support on a program for the development of effective drugs, from Phase I onwards;
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Organizational commitment involving “FDA senior managers.”
An Emergency Use Authorization (EUA) is a mechanism to facilitate the availability and use of medical
countermeasures, including vaccines, during public health emergencies, such as the current COVID-19
pandemic. Under an EUA, FDA may allow the use of unapproved medical products, or unapproved uses
of approved medical products in an emergency to diagnose, treat, or prevent serious or life-threatening
diseases or conditions when certain statutory criteria have been met, including when there are no
adequate, approved, and available alternatives.
In Europe, non-standard registration procedures under the Centralized Procedures are as follows:
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Conditional approval: valid only one year instead of five. It is granted only if the benefit / risk
ratio is positive, that is if the product responds to unmet medical needs, and if the benefits to
public health outweigh the risks associated with uncertainty because of an incomplete
evaluation of the drug (for instance, because of clinical trials still ongoing at the time of the
evaluation, or when additional clinical trials are needed). This temporary character may be
renewed if an appropriate report to support this is provided by the sponsor. Once the pending
studies are provided, it can become a “regular” marketing authorization.
Approval under exceptional circumstances: a marketing authorization may be granted in
exceptional cases, reviewed each year to reassess the risk-benefit balance when the initial
dossier for assessment of the drug cannot contain all required data, for instance when the
condition to be treated is rarely encountered.
Accelerated approval: the evaluation process is accelerated (150 days instead of 210 days)
when a drug is of major interest from the standpoint of public health or in particular from the
viewpoint of therapeutic innovation.
The PRIME (priority medicines) scheme refers to a process for enhanced interactions and
early dialogue with EMA to facilitate the development and speed up examination of drugs
which target unmet medical needs or offer a major therapeutic advantage over existing
treatments. Through PRIME, drug developers can expect to be eligible for accelerated
assessment at the time of application for a marketing authorisation.
Orphan drugs
Orphan drugs are drugs used for the prevention or treatment of deadly or serious rare conditions. In the
United States, the 1983 Orphan Drug Act is intended to encourage the development of treatments for
orphan diseases. The FDA grants the status of orphan drug to any drug aimed at treating diseases
affecting fewer than 200,000 people in the United States, or more in cases in which there is no reasonable
expectation that the cost of developing and making a product available in the United States for treatment
of the disease or condition will be recovered from sales of the product. The Orphan Drug Act also
provides the possibility of obtaining grants from the American government to cover clinical trials, tax
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credits to cover research costs, a possible exemption from application fees when filing for registration
with the FDA and from program fees, and a seven-year exclusivity if a marketing authorization is granted.
If a product with orphan designation receives the first FDA approval for the disease or condition for
which it has such designation or for a select indication or use within the rare disease or condition for
which it was designated, the product will generally receive orphan drug exclusivity. Orphan drug
exclusivity means that the FDA may not approve another sponsor’s marketing application for the same
drug for the same indication for seven years, except in certain limited circumstances. Orphan exclusivity
does not block the approval of a different product for the same rare disease or condition, nor does it block
the approval of the same product for different indications. If a biologic designated as an orphan drug
ultimately receives marketing approval for an indication broader than what was designated in its orphan
drug application, it may not be entitled to exclusivity. Orphan exclusivity will not bar approval of another
product under certain circumstances, including if a subsequent product with the same biologic for the
same indication is shown to be clinically superior to the approved product on the basis of greater efficacy
or safety, or providing a major contribution to patient care, or if the company with orphan drug
exclusivity is not able to meet market demand.
In Europe, equivalent legislation has been adopted to promote treatments for rare diseases (Regulation
141/2000/EC of December 16, 1999, as amended by Regulation 847/2000/EC of April 27, 2000). A
medicinal product may be designated as orphan if: (a) it is intended for the diagnosis, prevention or
treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000
persons in the European Union when the application is made, or (b) it is intended for the diagnosis,
prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the
European Union and that without incentives it is unlikely that the marketing of the medicinal product in
the European Union would generate sufficient return to justify the necessary investment.
For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of
diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if
such method exists, the medicinal product will be of significant benefit to those affected by that condition.
Medicinal products receiving orphan designation in the European Union can receive ten years of market
exclusivity, during which time no similar medicinal product may be placed on the market for the same
therapeutic indication. An orphan product can also obtain an additional two years of market exclusivity in
the European Union for pediatric studies (in this case for orphan drugs no extension to any supplementary
protection certificate can be granted, see further detail below). Orphan medicinal products are also
eligible for financial incentives such as reduction of fees or fee waivers and scientific assistance for study
proposals. (Articles 6 and 9 of the above-mentioned regulation). The application for orphan drug
designation must be submitted before the application for marketing authorization (Article 5). The
applicant will receive a fee reduction for the marketing authorization application if the orphan drug
designation has been granted, but not if the designation is still pending at the time the marketing
authorization is submitted. Orphan drug designation does not convey any advantage in, or shorten the
duration of, the regulatory review and approval process.
If the product obtains orphan drug status, it is granted an exclusive 10-year marketing period during
which no similar product may apply for a marketing authorization in the European Union for the same
indication, as well as an exemption from regulatory fees and other advantages. The 10-year market
exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no
longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not
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to justify maintenance of market exclusivity (Article 8). However, marketing authorization may be
granted to a similar medicinal product for the same indication at any time if:
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the holder of the MA for the original orphan medicinal product has given its consent to the
second applicant;
the holder of the MA for the original orphan medicinal product cannot supply sufficient
quantities of the orphan medicinal product; or
the second applicant can establish in the application that its product, although similar to the
orphan medicinal product already authorized, is safer, more effective or otherwise clinically
superior.
Registration procedures outside of Europe and the United States
In addition to regulation in the United States and Europe, a variety of foreign regulations govern clinical
trials, commercial sales and distribution of drugs. Pharmaceutical firms who wish to market their
medicinal drugs outside the European Union and the United States must submit marketing authorization
application to the national authorities of the concerned countries, such as the Pharmaceutical and Medical
Device Agency, or PMDA in Japan. The approval process varies from jurisdiction to jurisdiction and the
time to approval may be longer or shorter than that required by the FDA or European Commission.
Of note, in Great Britain, as a result of the end of the Brexit transition period, a reliance on the
Commission final decision to grant an MA will apply for a period of two years from 1 January 2021,
when determining an application for a Great Britain Marketing Authorization.
Post-approval regulations
Post-approval regulation in the United States
Biologics manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing
regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic
reporting, product sampling and distribution, advertising and promotion and reporting of adverse
experiences with the product. After approval, most changes to the approved product, such as adding new
indications or other labeling claims, are subject to prior FDA review and approval. There are also
continuing, annual user fee requirements for any marketed products and the establishments at which such
products are manufactured, as well as new application fees for supplemental applications with clinical
data.
In addition, manufacturers and other entities involved in the manufacture and distribution of approved
products are required to register their establishments with the FDA and state agencies, and are subject to
periodic unannounced inspections by the FDA and aforementioned state agencies for compliance with
cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior
FDA approval before being implemented. FDA regulations also require investigation and correction of
any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and
any third-party manufacturers that the sponsor may decide to use.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory
requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of
unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in revisions to the approved labeling to add new safety information; imposition
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of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other
restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, suspension of the approval, or
complete withdrawal of the product from the market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending applications or supplements to approved BLAs, or
suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil or criminal penalties.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug
Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security
Act, or DSCA, which regulate the distribution and tracing of prescription drug samples at the federal
level, and set minimum standards for the regulation of distributors by the states. The PDMA, its
implementing regulations and state laws limit the distribution of prescription pharmaceutical product
samples, and the DSCA imposes requirements to ensure accountability in distribution and to identify and
remove counterfeit and other illegitimate products from the market.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on
the market. Products may be promoted only for the approved indications and in accordance with the
provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses. Prescription products may be promoted only for the approved
indications and in accordance with the provisions of the approved label. However, companies may also
share truthful and not misleading information that is otherwise consistent with the labeling. A company
that is found to have improperly promoted off-label uses may be subject to significant liability.
Patent term restoration and extension in the United States
A patent claiming a new biologic product may be eligible for a limited patent term extension under the
Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during
product development and the FDA regulatory review. The restoration period granted on a patent covering
a product is typically one-half the time between the effective date a clinical investigation involving
human beings is begun and the submission date of an application, plus the time between the submission
date of an application and the ultimate approval date. Patent term extension cannot be used to extend the
remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent
applicable to an approved product is eligible for the extension, the application for the extension must be
submitted prior to the expiration of the patent in question, and only those claims covering the approved
drug, a method for using it, or a method for manufacturing it may be extended. A patent that covers
multiple products for which approval is sought can only be extended in connection with one of the
approvals. The USPTO reviews and approves the application for any patent term extension or restoration
in consultation with the FDA. For more information regarding the risks related to patent term restoration
and extension, please see “Risk Factors—Risks Related to Intellectual Property Rights—If we do not
obtain protection under the Hatch-Waxman Amendments and similar non-U.S. legislation for extending
the term of patents covering Lumoxiti and each of our product candidates, our business may be materially
harmed.”
Healthcare law and regulation in the United States
Healthcare providers and third-party payors play a primary role in the recommendation and prescription
of biologic products that are granted marketing approval. Arrangements with providers, consultants, third-
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party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims
laws, transparency laws and patient data privacy laws and regulations and other healthcare laws and
regulations that may constrain business and/or financial arrangements. Restrictions under applicable
federal and state healthcare laws and regulations, include the following:
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the U.S. Anti-Kickback Statute, which prohibits, among other things, persons and entities from
knowingly and willfully soliciting, offering, paying, receiving or providing remuneration,
directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual
for, or the purchase, order or recommendation of, any good or service, for which payment may
be made, in whole or in part, under a federal healthcare program such as Medicare and
Medicaid;
the U.S. civil and criminal false claims laws, including the civil False Claims Act, and civil
monetary penalties laws, which prohibit individuals or entities from, among other things,
knowingly presenting, or causing to be presented, to the federal government, claims for
payment that are false, fictitious or fraudulent or knowingly making, using or causing to made
or used a false record or statement to avoid, decrease or conceal an obligation to pay money to
the federal government;
the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, which
created additional federal criminal laws that prohibit, among other things, knowingly and
willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit
program or making false statements relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health
Act, and their respective implementing regulations, including the Final Omnibus Rule
published in January 2013, which impose obligations on covered entities and their business
associates, including mandatory contractual terms, with respect to safeguarding the privacy,
security and transmission of individually identifiable health information;
the federal transparency requirements known as the federal Physician Payments Sunshine Act,
under the Patient Protection and Affordable Care Act, as amended by the Health Care
Education Reconciliation Act, or the ACA, which requires certain manufacturers of drugs,
devices, biologics and medical supplies to report annually to the Centers for Medicare &
Medicaid Services, or CMS, within the United States Department of Health and Human
Services, information related to payments and other transfers of value made by that entity to
physicians and teaching hospitals, as well as ownership and investment interests held by
physicians and their immediate family members; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims
laws, which may apply to healthcare items or services that are reimbursed by non-
governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
government in addition to requiring manufacturers to report information related to payments to physicians
and other health care providers or marketing expenditures. Certain state laws require the reporting of
information relating to drug and biologic pricing; and some state and local laws require the registration of
pharmaceutical sales representatives. State and foreign laws also govern the privacy and security of health
information in some circumstances, many of which differ from each other in significant ways and often
are not preempted by HIPAA, thus complicating compliance efforts.
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Failure to comply with these laws or any other governmental regulations as applicable, could result in the
imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement,
imprisonment, possible exclusion from government funded healthcare programs, such as Medicare and
Medicaid, additional integrity reporting requirements and oversight, as well as contractual damages,
reputational harm, diminished profits and future earnings, and curtailment of operations.
Healthcare reform in the United States
A primary trend in the United States healthcare industry and elsewhere is cost containment. There have
been a number of federal and state proposals during the last few years regarding the pricing of
pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for biologics and
other medical products, government control and other changes to the healthcare system in the United
States.
For example, the United States and state governments continue to propose and pass legislation designed
to reduce the cost of healthcare. In March 2010, the United States Congress enacted the ACA, which,
among other things, includes changes to the coverage and payment for products under government health
care programs. Among the provisions of the ACA of importance to potential product candidates are:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded
prescription biologic agents, apportioned among these entities according to their market share
in certain government healthcare programs, although this fee would not apply to sales of
certain products approved exclusively for orphan indications;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states
to offer Medicaid coverage to certain individuals with income at or below 133% of the federal
poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by
increasing the minimum rebate for both branded and generic products and revising the
definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid
rebates on outpatient prescription product prices and extending rebate liability to prescriptions
for individuals enrolled in Medicare Advantage plans;
addressed a new methodology by which rebates owed by manufacturers under the Medicaid
Drug Rebate Program are calculated for products that are inhaled, infused, instilled, implanted
or injected;
expanded the types of entities eligible for the 340B drug discount program;
established the Medicare Part D coverage gap discount program by requiring manufacturers to
now provide a 70% point-of-sale-discount off the negotiated price of applicable brand
products to eligible beneficiaries during their coverage gap period as a condition for the
manufacturers’ outpatient products to be covered under Medicare Part D;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and
conduct comparative clinical effectiveness research, along with funding for such research; and
established the Center for Medicare and Medicaid Innovation within CMS to test innovative
payment and service delivery models to lower Medicare and Medicaid spending, potentially
including prescription product spending.
There have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent
efforts by the Trump administration to repeal and replace certain aspects of the ACA, and we expect such
challenges to continue. Since January 2017, President Trump has signed two executive orders designed to
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delay the implementation of certain provisions of the ACA or otherwise circumvent some of the
requirements for health insurance mandated by the ACA. Concurrently, Congress has considered
legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed
comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA
have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision that repealed,
effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain
individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly
referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently
eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-
sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the
health insurer tax. In July and December 2018, CMS published final rules with respect to permitting
further collections and payments to and from certain ACA qualified health plans and health insurance
issuers under its risk adjustment program in response to the outcome of federal district court litigation
regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S.
District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual
mandate” was repealed by the U.S. Congress as part of the Tax Cuts and Jobs Act of 2017 Additionally,
on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that
the individual mandate was unconstitutional and remanded the case back to the District Court to
determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this
decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA. We
continue to evaluate how the ACA and recent efforts to limit the implementation of the ACA will impact
our business.
Other legislative changes have been proposed and adopted in the United States since the ACA was
enacted. For example, in August 2011, the Budget Control Act of 2011, among other things, created
measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked
with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021,
was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several
government programs. This includes aggregate reductions of Medicare payments to providers of up to 2%
per fiscal year, which went into effect in April 2013 and will remain in effect through 2027 unless
additional Congressional action is taken. In January 2013, President Obama signed into law the American
Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several
providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of
limitations period for the government to recover overpayments to providers from three to five years.
Furthermore, there has been increasing legislative and enforcement interest in the United States with
respect to drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries
and proposed and enacted federal and state legislation designed to, among other things, bring more
transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies
for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2020 contains
further drug price control measures that could be enacted during the budget process or in other future
legislation. The Trump administration also released a “Blueprint”, or plan, to lower drug prices and
reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer
competition, increase the negotiating power of certain federal healthcare programs, incentivize
manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products
paid by consumers. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage
Plans the option of using step therapy for Part B drugs beginning January 1, 2020. This final rule codified
CMS’s policy change that was effective January 1, 2019. While some measures may require additional
authorization to become effective, the U.S. Congress and the Trump administration have each indicated
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that it will continue to seek new legislative and/or administrative measures to control drug costs. At the
state level, legislatures are increasingly passing legislation and implementing regulations designed to
control pharmaceutical and biological product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and
bulk purchasing.
Pharmacovigilance system in Europe
The holder of a European MA must establish and maintain a pharmacovigilance system and appoint an
individual qualified person for pharmacovigilance, or QPPV, who is responsible for oversight of that
system. Key obligations include expedited reporting of suspected serious adverse reactions and
submission of periodic safety update reports, or PSURs.
All new European MA applications must include a risk management plan, or RMP, describing the risk
management system that the company will put in place and documenting measures to prevent or minimize
the risks associated with the product. The regulatory authorities may also impose specific obligations as a
condition of the MA. Such risk-minimization measures or post-authorization obligations may include
additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical
trials or post-authorization safety studies. RMPs and PSURs are routinely available to third parties
requesting access, subject to limited redactions.
Advertising regulation in Europe
All advertising and promotional activities for the product must be consistent with the approved summary
of product characteristics, and therefore all off-label promotion is prohibited. Direct-to-consumer
advertising of prescription medicines is also prohibited in the European Union. Although general
requirements for advertising and promotion of medicinal products are established under European Union
directives, the details are governed by regulations in each European Union Member State and can differ
from one country to another.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines,
suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution.
Pharmaceutical coverage, pricing and reimbursement
European Union
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some
countries provide that products may be marketed only after a reimbursement price has been agreed. Some
countries may require the completion of additional studies that compare the cost-effectiveness of a
particular product candidate to currently available therapies or so-called health technology assessments, in
order to obtain reimbursement or pricing approval. For example, the European Union provides options for
its member states to restrict the range of products for which their national health insurance systems
provide reimbursement for and to control the prices of medicinal products for human use. European
Union member states may approve a specific price for a product or it may instead adopt a system of direct
or indirect controls on the profitability of the company placing the product on the market. Other member
states allow companies to fix their own prices for products, but monitor and control prescription volumes
and issue guidance to physicians to limit prescriptions. Recently, many countries in the European Union
have increased the amount of discounts required on pharmaceuticals and these efforts could continue as
countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt
crises experienced by many countries in the European Union. The downward pressure on health care costs
in general, particularly prescription products, has become intense. As a result, increasingly high barriers
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are being erected to the entry of new products. Political, economic and regulatory developments may
further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has
been obtained. Reference pricing used by various European Union member states, and parallel trade, i.e.,
arbitrage between low-priced and high-priced member states, can further reduce prices. There can be no
assurance that any country that has price controls or reimbursement limitations for pharmaceutical
products will allow favorable reimbursement and pricing arrangements for any products, if approved in
those countries.
United States
In the United States, patients who are prescribed treatments for their conditions and providers performing
the prescribed services generally rely on third-party payors to reimburse all or part of the associated
healthcare costs. Significant uncertainty exists as to the coverage and reimbursement status of products
approved by the FDA and other government authorities. Thus, even if a product candidate is approved,
sales of the product will depend, in part, on the extent to which third-party payors, including government
health programs in the United States such as Medicare and Medicaid, commercial health insurers and
managed care organizations, provide coverage, and establish adequate reimbursement levels for, the
product. The process for determining whether a payor will provide coverage for a product may be
separate from the process for setting the price or reimbursement rate that the payor will pay for the
product once coverage is approved. Third-party payors are increasingly challenging the prices charged,
examining the medical necessity, and reviewing the cost-effectiveness of medical products and services
and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an
approved list, also known as a formulary, which may not include all of the approved products for a
particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a
company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other
comparable marketing approvals. Nonetheless, product candidates may not be considered medically
necessary or cost effective. A decision by a third-party payor not to cover a product candidate could
reduce physician utilization once the product is approved and have a material adverse effect on sales,
results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a
product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s
determination to provide coverage for a product does not assure that other payors will also provide
coverage and reimbursement for the product, and the level of coverage and reimbursement can differ
significantly from payor to payor.
The containment of healthcare costs also has become a priority of federal, state and foreign governments
and the prices of products have been a focus in this effort. Governments have shown significant interest in
implementing cost-containment programs, including price controls, restrictions on reimbursement and
requirements for substitution of generic products. Adoption of price controls and cost-containment
measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures,
could further limit a company’s revenue generated from the sale of any approved products. Coverage
policies and third-party reimbursement rates may change at any time. Even if favorable coverage and
reimbursement status is attained for one or more products for which a company or its collaborators
receive marketing approval, less favorable coverage policies and reimbursement rates may be
implemented in the future.
Anti-corruption, anti-kickback and transparency regulations
Arrangements with healthcare providers, physicians, third-party payors and customers can expose
pharmaceutical manufactures to broadly applicable anti-bribery, fraud and abuse and other healthcare
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laws and regulations, which may constrain the business or financial arrangements and relationships
through which such companies sell, market and distribute pharmaceutical products.
More specifically, each of the above-mentioned steps of the development of therapeutic products for
human use is heavily regulated and therefore involves significant interaction with public officials which is
likely to cause a risk of corruption or bribery. For instance, in many countries, hospitals are operated by
the government, and doctors and other hospital employees are considered foreign officials. Certain
payments to hospitals in connection with clinical trials and other work have been deemed to be improper
payments to government officials and have led to enforcement actions. That is why business activity may
be subject to anti-bribery or anti-corruption laws, regulations or rules of other countries in which we
operate, including without limitation the Foreign Corrupt Practices Act, the U.K. Bribery Act or the
French Sapin 2 Law.
All these statutes generally prohibit offering, promising, giving, or authorizing others to give anything of
value, either directly or indirectly, to a government or a foreign government official or employees of
public international organizations in order to influence official action, or otherwise obtain or retain
business. The implementation of these statutes may also impose internal compliance programs,
procedures and guidelines to detect and report any suspicious activities and to mitigate any risks of
noncompliance which may occur.
In addition, we may be subject to specific healthcare regulations, including, without limitation:
•
•
the French “transparency” provisions, or “French Sunshine Act” (Articles L. 1453-1 and
D. 1453-1 and seq. of the French Public Health Code or PHC), which contains provisions
regarding transparency of fees received by some healthcare professionals from industries, i.e.
companies manufacturing or marketing healthcare products (medicinal products, medical
devices, etc.) in France. According to the provisions, these companies shall publicly disclose
(on a specific public website available at https://transparence.sante.gouv.fr) the advantages and
fees paid to healthcare professionals amounting to €10 or above, as well as the agreements
concluded with the latter, along with detailed information about each agreement (the precise
subject matter of the agreement, the date of signature of the agreement, its end date, the total
amount paid to the healthcare professional, etc.); and
the French “anti-gift” provisions (Articles L.1453-3 to L.1453-12 PHC), setting out a general
prohibition of payments and rewards from industries, i.e. companies manufacturing or
marketing health products to healthcare professionals (HCP), healthcare organizations (HCO),
healthcare associations and students with limited exceptions, and strictly defining the
conditions under which such payments or awards are lawful. A new regime is applicable since
October 1st, 2020 which entails strict formalities depending on the amount paid, when
authorized, to the HCP, HCO, students or associations.
Data protection rules
The Regulation 2016/679, known as the General Data Protection Regulation, or GDPR, that came into
force on May 25, 2018, as well as EU Member State implementing legislations, apply to the collection
and processing of personal data, including health-related information, by companies located in the EU, or
in certain circumstances, by companies located outside of the EU and processing personal information of
individuals located in the EU.
These laws impose strict obligations on the ability to process personal data, including health-related
information, in particular in relation to their collection, use, disclosure and transfer.
Also, in certain countries, in particular France, the conduct of clinical trials is subject to compliance with
specific provisions of the Act No.78-17 of January 6, 1978 on Information Technology, Data Files and
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Civil Liberties, as amended. These provisions require, among others, the filing of compliance
undertakings with “standard methodologies” and a specific framework applicable to the retention of
personal data when researching in the health sector (July 2020) adopted by the French Data Protection
Authority (the CNIL), or, if not compliant, obtaining a specific authorization from the CNIL.
The most common standard methodologies are the following:
•
•
Decision No. 2018-153 of May 3, 2018 concerning the approval of a standard methodology for
the processing of personal data carried out within the context of research in the field of clinical
trials, which requires the express consent of the person involved (standard methodology
MR-001)
Decision No. 2018-154 of May 3, 2018 concerning the approval of a standard methodology for
the processing of personal data in the context of research in the field of health, which does not
require the express consent of the person involved (methodology MR-003).
Deliberation n ° 2020-077 of June 18, 2020 adopting a framework relating to the retention periods of
personal data processed for the purposes of research, study or evaluation in the field of health.
In certain specific cases, entities processing health personal data may have to comply with article L1111-8
of the French Public Health Code which imposes certain certifications for the hosting service providers.
C.
Organizational Structure.
On December 31, 2019, Innate Pharma was the sole shareholder of (i) Innate Pharma Inc. and (ii) Innate
Pharma France.
On December 31, 2020, Innate Pharma is the sole shareholder of Innate Pharma Inc., Innate Pharma
France was dissolved without liquidation on November 30, 2020 under article 1844-5 section 3 of the
French Civil Code.
D.
Property, Plants and Equipment.
Our corporate offices and laboratories are located in Luminy, near Marseille, France. In 2008, we signed a
lease-financing agreement with SOGEBAIL, a subsidiary of Société Générale, for €6.6 million to finance
the acquisition of our offices. The lease-financing agreement had a 12-year term. We had a purchase
option for all of the buildings and land for the lump sum of €1 at the end of the term of the lease-financing
agreement on June 8, 2020. In accordance with the terms of the lease-financing agreement, we exercised
this buy-back option, and the deed of sale was signed on October 29, 2020.
Item 4A. Unresolved Staff Comments.
Not applicable.
Item 5. Operating and Financial Review and Prospects.
You should read the following discussion of our financial condition and results of operations in
conjunction with the “Selected Consolidated Financial Data” and our consolidated financial statements
and the related notes thereto included elsewhere in this Annual Report. In addition to historical
information, the following discussion and analysis contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results and the timing of events could differ materially from those
anticipated in the forward-looking statements. Factors that could cause or contribute to these differences
include those discussed below and elsewhere in this Annual Report, particularly in sections titled “Item
3.D – Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Our audited
consolidated financial statements as of and for the years ended December 31, 2018, 2019 and 2020 have
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been prepared in accordance with IFRS as issued by the IASB, which may differ in material respects from
generally accepted accounting principles in other jurisdictions, including the United States.
Overview
We are a biotechnology company focused on discovering, developing and commercializing first-in-class
therapeutic antibodies designed to harness the immune system for the treatment of oncology indications
with significant unmet medical need. We have extensive experience in research and development in
immuno-oncology, having been pioneers in the understanding of natural killer cell, or NK cell, biology,
and later expanding our expertise in the tumor microenvironment, tumor antigens and antibody
engineering fields. We have built, internally and through our business development strategy, a broad and
diversified portfolio including an approved product, four clinical product candidates and a robust
preclinical pipeline. We have entered into collaborations with leaders in the biopharmaceutical industry,
such as AstraZeneca and Sanofi, to leverage their development capabilities and expertise for some of our
candidates. We believe our product candidates and clinical development approach are differentiated from
current immuno-oncology therapies and have the potential to significantly improve the clinical outcome
for patients with cancer.
Since our inception, we have devoted substantially all of our financial resources to research and
development efforts, including conducting preclinical studies and clinical trials of our product candidates,
providing general and administrative support for our operations and protecting our intellectual property.
Our marketed product, Lumoxiti, was approved by the U.S. Food and Drug Administration, or FDA,
under priority review in September 2018 and was commercially launched by AstraZeneca AB, or
AstraZeneca, in November 2018. We have not yet generated any material revenue from product sales. On
December 11, 2020, the Company announced that it would not continue the marketing activities of
Lumoxiti in the United States and in Europe. In accordance with the agreement on the acquisition of the
commercial rights of Lumoxiti signed with AstraZeneca in October 2018, Innate has decided to return
these rights in the United States and in Europe to AstraZeneca
As of December 31, 2020, we had €190.6 million in cash, cash equivalents, short-term investments and
non-current financial assets. Since our inception, we have raised a total of €306.4 million through the sale
of equity securities, including €33.7 million in the initial public offering of our ordinary shares on
Euronext Paris in 2006 and €66.0 million in the initial public offering of our ordinary shares on Euronext
and ADS on Nasdaq New-York in 2019. We have also received $530.0 million (€461,7 million) in
payments from our collaborators, including AstraZeneca, since 2011, excluding payments received for
purchases of our equity securities by our collaborators.
We have significant agreements with AstraZeneca pursuant to which we have the right to earn milestone
and royalty payments. We have other license agreements pursuant to which we have acquired intellectual
property and under which we will be required to make payments to the counterparty upon the
achievement of certain milestone events and commercial sales related to our product candidates.
We have incurred net losses in each year since our inception except for the years ended December 31,
2016 and 2018. Our net income (loss) was €3.0 million, €(20.8) million and €(64.0) million for the years
ended December 31, 2018, 2019 and 2020, respectively. Substantially all of our net losses have resulted
from costs incurred in connection with our research and development programs and from selling, general
and administrative expenses associated with our operations. As we continue advancing our product
candidates through research and development programs, we expect to continue to incur significant
expenses and may again incur operating losses in future periods. We anticipate that such expenses will
increase substantially if and as we:
•
continue the research and development of our product candidates;
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•
•
•
•
•
•
•
•
•
•
•
•
•
initiate clinical trials for, or additional preclinical development of, our product candidates;
further develop and refine the manufacturing processes for our product candidates;
change or add manufacturers or suppliers of biological materials;
seek regulatory and marketing authorizations for any of our product candidates that
successfully complete development;
establish a sales, marketing and distribution infrastructure to commercialize products for
which we may obtain marketing authorization;
seek to identify and validate additional product candidates;
acquire or license other product candidates, technologies or biological materials;
make milestone, royalty or other payments under any current or future license agreements;
obtain, maintain, protect and enforce our intellectual property portfolio;
secure manufacturing arrangements for commercial production;
seek to attract and retain new and existing skilled personnel;
create additional infrastructure to support our operations as a U.S. public company and incur
increased legal, accounting, investor relations and other expenses; and
experience delays or encounter issues with any of the above.
We anticipate that we will need to raise additional funding, prior to completing clinical development of
any of our product candidates. Until such time that we can generate significant revenues from sales of
our product candidates, if approved, we expect to finance our operating activities through a combination
of milestone payments received pursuant to our strategic alliances, equity offerings, debt financings,
government or other third-party funding and collaborations, and licensing arrangements. However, we
may not receive milestone payments when expected, or at all, and we may be unable to raise additional
funds or enter into such arrangements when needed on favorable terms, or at all, which would have a
negative impact on our financial condition and could force us to delay, limit, reduce or terminate our
development programs or commercialization efforts or grant to others rights to develop or market product
candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional
funding could cause us to cease operations, in part or in full.
Presentation of Financial Information
Our audited consolidated financial statements included herein as of and for the years ended December 31,
2018, 2019 and 2020 have been prepared in accordance with IFRS as issued by the IASB.
Due to the listing of our ordinary shares on Euronext Paris and in accordance with the European Union’s
regulation No. 1606/2002 of July 19, 2002, we also prepare and publish our consolidated financial
statements in accordance with IFRS as adopted by the European Union, or EU.
All the standards published by the IASB that are mandatorily applicable in the years ended December
2018, 2019 and 2020 are endorsed by the EU and are mandatorily applicable in the EU. Therefore, our
audited consolidated financial statements for the years ended December 31, 2018, 2019 and 2020 are
compliant with both IFRS as issued by the IASB and IFRS as adopted by the EU.
The preparation of financial statements in accordance with IFRS requires us to make significant
judgments and estimates which are presented below. See “—Critical Accounting Policies and Significant
Judgments and Estimates.”
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Our Principal Collaboration and Licensing Agreements
Our results of operations are impacted by the terms and conditions of our principal collaboration and
licensing agreements. For a description of our principal collaboration and licensing agreements, see “Item
10C.—Material Contracts.”
Our Principal Components of Our Results of Operations
Revenue and other income
Our revenue and other income mainly consists of revenues from collaboration and licensing agreements
and government financing for research expenditure in the form of the research tax credits, as well as other
grants.
Revenue from collaboration and licensing agreements
We currently derive substantially all our revenues from payments pursuant to our licensing and
collaboration agreements with AstraZeneca relating to monalizumab and IPH5201, consisting of (i)
upfront payments, (ii) milestone payments based upon the achievement of pre-determined development,
regulatory and commercial events and (iii) research and development fees related to charges for full time
equivalents, or FTEs, at contracted rates and reimbursement of research and development expenses.
We have not generated any revenue from product sales since our inception, with the exception in 2018,
2019 and 2020 of Lumoxiti sales, which were classified in the net income (loss) from distribution
agreements during the transition period with AstraZeneca (ended September 30, 2020) and in the line
"sales" in revenue for the 2020 fourth quarter. Our ability to generate significant product revenue and to
become profitable will depend upon our ability to successfully develop, obtain regulatory approval for
and commercialize any product candidates. Because of the numerous risks and uncertainties associated
with product development and regulatory approval, we are unable to predict the amount, timing or
whether we will be able to obtain product revenue.
On January 1, 2018, IFRS 15 Revenue from contracts with customers, or IFRS 15, became mandatorily
applicable.
IFRS 15 supersedes IAS 11 Construction contracts, IAS 18 Revenue, or IAS 18, and related
interpretations, and changes the accounting treatment of the revenue relating to our agreement with
AstraZeneca with respect to monalizumab. Under IFRS 15, our co-funding share of research and
development expenses incurred by AstraZeneca is no longer recorded as research and development
expense, but rather is deducted from the recognition of the upfront payment received by us upon
execution of the agreement. The amount of our co-funding obligation is now recognized as a
collaboration liability and is no longer recorded as deferred revenue in the consolidated statement of
financial position. When the collaboration liability is in a foreign currency, which is the case in the
context of this agreement, it is translated at each reporting date using the closing exchange rate, which
generates foreign exchange gains or losses in our consolidated statement of income (loss).
We have opted for the modified retrospective approach without any of the practical expedients allowed by
IFRS 15. Accordingly, the comparative information is not restated and the cumulative impact of the first
application is presented as an adjustment of the opening equity as of January 1, 2018. Consequently, the
first application of IFRS 15 doesn't affect the comparability of our revenue and research and development
expenses for the years ended December 31, 2018, 2019 and 2020.
Since January 1, 2018, agreements are analyzed according to IFRS 15. For our agreements relating to
monalizumab and IPH5201, we have concluded that the license is not distinct from the research and
development services because those services increase the utility of the license. As a result, the estimated
transaction price is spread over the period when we are engaged to deliver services to AstraZeneca based
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on the percentage of completion of the costs to be incurred, and non-refundable initial payments received
are deferred and recognized as revenue over time.
Variable consideration can be included in the estimated transaction price only if it is highly probable that
the related revenue will not be reversed in the future. According to the level of uncertainty relating to the
results of preclinical studies and clinical trials and the decisions relating to regulatory approvals, related
payments are excluded from the transaction price as long as the triggering event is not certain. If and
when the triggering event occurs, the corresponding milestone is added to the transaction price and
revenue is recognized relative to the percentage of completion related to the transaction.
When a collaboration contract grants to the collaborator an option to acquire a license, we exercise
judgment to determine the beginning date of transfer of the control of the license. Depending on the
situation, the recognition of the revenue begins from the date of the contract, with the payment relating to
the exercise of the option being therefore considered as variable consideration, or the recognition is
deferred until the exercise or expiration of the option.
In addition, under the agreements with AstraZeneca relating to IPH5201 and avdoralimab, we are
reimbursed for some of our internal and external costs. We recognize these reimbursements as revenue in
our consolidated statement of income (loss) when the related costs are incurred.
Revenue recognition involves significant judgments and estimates by management. See “—Critical
Accounting Policies and Significant Judgments and Estimates.”
Prior to 2018, revenue was recognized in accordance with IAS 18, which resulted in a difference in
revenue recognition accounting policies used for the audited consolidated financial statements for the
years ended December 31, 2018, 2019 and 2020.
Government financing for research expenditures
Our government financing for research expenditures consists of research tax credits (crédit d’impôt
recherche) and grants.
The research tax credit is granted to companies by the French tax authorities in order to encourage them
to conduct technical and scientific research. Companies demonstrating that they have expenses that meet
the required criteria, including research expenses located in France or, since January 1, 2005, within the
EU or in another state that is a party to the agreement in the European Economic Area that has concluded
a tax treaty with France that contains an administrative assistance clause, receive a tax credit which can be
used against the payment of the corporate tax due for the fiscal year in which the expenses were incurred
and during the next three fiscal years, or, as applicable, can be reimbursed for the excess portion. The
expenditures taken into account for the calculation of the research tax credit involve only research
expenses.
The main characteristics of the research tax credit are:
•
•
•
the research tax credit results in a cash inflow to us, i.e., it is used to offset the payment of
corporate income tax the year after the date of its record as a tax credit in the income
statement, or is paid directly to us from the tax authorities for the portion that remains unused,
in principle three years after the fiscal year for which it is determined;
our corporate income tax liability does not limit the amount of the research tax credit—if we
do not pay any corporate income tax, we can offset the remaining research tax credit the year
following its record in the income statement; and
the research tax credit is not included in the determination of the corporate income tax.
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When the research tax credit is not deductible from taxes payable by us, it is generally reimbursed by the
French government three years after the fiscal year for which it is determined. However, since 2011,
companies that meet the definition of small and medium sized enterprises (“SMEs”) according to the
European Union criteria are eligible for early reimbursement of their research tax credit receivable. The
status of SME is lost when the criteria for eligibility are exceeded during two consecutive years. We lost
our status as an SME at the end of the fiscal year 2019.
We have concluded that the research tax credit meets the definition of a government grant as defined in
IAS 20 Accounting for government grants and disclosure of government assistance, or IAS 20, and that
the classification as “Revenue and other income” in our consolidated statement of income (loss) is
appropriate.
We also from time to time receive government grants, which are recognized in our consolidated statement
of income (loss) when we comply with the conditions attached to the grants and they are non-repayable
grants.
Sales
As of December 31, 2020, following the end of the transition period relating to the commercialization of
Lumoxiti in the United States on September 30, 2020, the Company recognized net sales of Lumoxiti for
the fourth quarter of 2020.
Operating expenses
Since inception, our operating expenses have consisted primarily of research and development expenses
and selling, general and administration expenses.
Research and development expenses
We engage in substantial research and development efforts to develop innovative product candidates.
Research and development expenses consist primarily of:
•
•
•
•
personnel costs, including salaries, related benefits and share-based compensation, for our
employees engaged in scientific research and development functions;
cost of third-party contractors and academic institutions involved in preclinical studies or
clinical trials that we may conduct, or third-party contractors involved in field trials;
purchases of biological raw materials, real estate leasing costs as well as conferences and
travel costs; and
certain other expenses, such as expenses for use of laboratories and facilities for our research
and development activities as well as depreciation and amortization.
Our research and development efforts are focused on our existing product candidates and preclinical
programs, including the advancement of our lead product candidates, monalizumab, lacutamab and
avdoralimab. Our direct research and development expenses consist principally of external costs
associated with subcontracting of preclinical and clinical operations to third parties, which we track on a
program-by-program basis. We also use our employee and infrastructure resources across multiple
research and development programs, and do not track these indirect expenses on a program-by-program
basis.
Research and development costs are expensed as incurred. Costs for certain activities are recognized
based on an evaluation of the progress to completion of specific tasks using data such as information
provided to us by our vendors and analyzing the progress of our preclinical studies or other services
performed. Significant judgment and estimates are made in determining the accrued expense balances at
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the end of any reporting period. Non-refundable advance payments for research and development goods
or services to be received in the future from third parties are deferred and capitalized. The capitalized
amounts are expensed as the related goods are delivered or the services are performed.
Research and development activities are central to our business. As product candidates in later stages of
clinical development generally have higher development costs than those in earlier stages of clinical
development, primarily due to the increased size and duration of later-stage clinical trials, we expect that
our research and development costs will increase in the foreseeable future. Such cost increases are
expected to occur as we conduct existing clinical trials and initiate future clinical trials, manufacture pre-
commercial clinical trial and preclinical study materials, expand our research and development efforts,
seek regulatory approvals for our product candidates that successfully complete clinical trials, access and
develop additional technologies and hire additional personnel to support our research and development
efforts.
We cannot determine with certainty the duration and total costs of our future clinical trials of our product
candidates or if, when, or to what extent we will generate revenues from the commercialization and sale
of any of our product candidates, or those of our collaborators, that might obtain regulatory approval. We
may never succeed in achieving regulatory approval for any of our product candidates. The duration,
costs and timing of clinical trials and development of our product candidates will depend on a variety of
factors, including:
•
•
•
•
•
the scope, rate of progress and expense of our ongoing clinical trials as well as any additional
preclinical studies, clinical trials conducted by our collaborators and other research and
development activities;
clinical trial and preclinical study results;
the terms and timing of regulatory approvals;
the expense of filing, maintaining, prosecuting, defending and enforcing patent claims and
other intellectual property rights; and
the ability to market, commercialize and achieve market acceptance for any products that
receive regulatory approval.
A change in the outcome of any of these variables with respect to the development of monalizumab,
lacutamab and avdoralimab or any other product candidate or preclinical program that we are developing
or could develop in the future could mean a significant change in the costs and timing associated with the
development of such product candidates or preclinical programs. For example, if the FDA, the European
Medicines Agency, or EMA, or another regulatory authority were to require us to conduct preclinical
studies and clinical trials beyond those that we currently anticipate will be required for the completion of
clinical development, or if we experience significant delays in enrollment in any clinical trials, we could
be required to spend significant additional financial resources and time on the completion of clinical
development. For a discussion of the risks associated with completing the development projects on
schedule, see “Risk Factors—Risks Related to the Development of Our Product Candidates.”
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of personnel costs and share-based
compensation for personnel other than research and development staff. Selling, general and administrative
expenses also consist of fees for professional services, mainly related to audit, IT, accounting, recruitment
and legal services, communication and travel costs, real-estate leasing costs, office furniture and
equipment costs, allowance for amortization and depreciation, director’s attendance fees and insurance
costs and overhead costs, such as postal and telecommunications expenses.
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Our selling, general and administrative increased in the year ended December 31, 2020. This increase
mainly resulted from the costs incurred for the marketing of Lumoxiti and the operation of our US
subsidiary until the decision to return the US and EU commercialization rights to AstraZeneca at the end
of 2020. In accordance with the agreement signed in 2018, the companies will develop a transition plan,
including an agreement on the costs and timeframes for the transfer of the marketing and distribution
rights for Lumoxiti in the United States to AstraZeneca in 2021. AstraZeneca will remain holder of the
marketing authorization application in Europe.
Our share of Lumoxiti operational expenses was included until the end of the transition period
(September 30, 2020) in net income (loss) from distribution agreements because AstraZeneca has been
responsible for commercialization activities to date. However, we have directly incurred operational
expenses related to Lumoxiti in the year ended December 31, 2019 and 2020 and we will expect to incur
additional operational expenses related to Lumoxiti in the future (2021 and 2022) until the end of the
transition plan. These operational expenses consist mainly of selling, general and administrative expenses.
Impairment of intangible assets
The Group assesses at the end of each reporting period whether there is an indication that intangible
assets, property and equipment may be impaired. If any indication exists, the Group estimates the
recoverable amount of the related asset.
Whether or not there is any indication of impairment, intangible assets not yet available for use are tested
for impairment annually by comparing their carrying amount with their recoverable amount.
Pursuant to IAS 36—Impairment of Assets, criteria for assessing indication of loss in value may notably
include performance levels lower than forecast, a significant change in market data or the regulatory
environment, or obsolescence or physical damage of the asset not included in the amortization/
depreciation schedule. The recognition of an impairment loss alters the amortizable/depreciable amount
and potentially, the amortization/depreciation schedule of the relevant asset.
As of December 31, 2020, impairment of intangible assets consisted to the full depreciation of Lumoxiti
rights for an amount of €43.5 million, following the Company's decision to return the US and EU
commercialization rights of Lumoxiti to AstraZeneca.
Net income (loss) from distribution agreements
When commercialization activities related to a product that we own or license are performed by a third-
party under a collaboration or transition agreement, we must determine if the collaborator acts as an agent
or a principal. With respect to our agreement with AstraZeneca related to Lumoxiti, we concluded that
AstraZeneca acted as principal during the periods presented until the end of the transition period
(September 30, 2020) because AstraZeneca controlled the commercialization activities and is the holder
of the applicable regulatory marketing authorization.
As a result, we recognize on a single line the net income (loss) from our Lumoxiti distribution agreement
until the end of the transition period in an amount equal to the sales for the period net of the
administrative and selling expenses associated with the sales revenue allocated to us.
Net financial income (loss)
Our financial loss primarily consists of realized and unrealized foreign exchange gains and losses
primarily related to the purchase of services as well as deposit accounts denominated in U.S. dollars and
gains and losses and interest received in relation to cash and cash equivalents that have been deposited in
cash accounts, short-term fixed deposits and short-term highly liquid investments with original maturities
of three months or less. Our cash and cash equivalents generate a modest amount of interest income. We
expect to continue this investment philosophy in the future.
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A.
Operating Results
Comparisons for the years ended December 31, 2019 and 2020
The following table sets forth a summary of our consolidated statements of income (loss) for the periods
presented.
Revenue from collaboration and licensing agreements
Government financing for research expenditures
Sales
Revenue and other income
Research and development expenses
Selling, general and administrative expenses
Impairment of intangible assets
Operating expenses
Net income (loss) from distribution agreements
Operating income (loss)
Financial income
Financial expenses
Net financial income (loss)
Net income (loss) before tax
Income tax expense
Net income (loss)
Year ended December 31,
2019 (1)
2020
(in thousands)
€ 68,974
16,840
—
€ 56,155
13,618
678
85,814
70,451
(78,844)
(25,803)
—
(58,613)
(31,246)
(43,529)
(104,647)
(133,388)
(8,219)
861
(27,052)
(62,076)
11,269
(4,976)
4,855
(6,763)
6,293
(1,908)
(20,759)
—
(63,984)
—
€ (20,759)
€ (63,984)
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the
impacts of the adoption of IFRS 16 that became applicable on January 1, 2019. The Company
applied the modified retrospective transition method. As a consequence, the comparative
consolidated financial information as of and for the years ended December 31, 2018 have not
been restated. See Note 2.f to our consolidated financial statements appearing elsewhere in this
Annual Report.
137
Revenue and other income
Revenue and other income resulted from collaboration and licensing agreements and government
financing for research expenditure. Revenue and other income decreased by €15.4 million, or 17.9% , to
€70.5 million for the year ended December 31, 2020, as compared to revenue and other income of €85.8
million for the year ended December 31, 2019 .
Revenue from collaboration and licensing agreements
Government financing for research expenditures
Sales
Revenue and other income
Year ended December 31,
2019
2020
(in thousands)
€ 68,974
16,840
—
€ 56,155
13,618
678
€ 85,814
€ 70,451
Revenue from collaboration and licensing agreements
Revenue from collaboration and licensing agreements decreased by €12.8 million, or 18.6%, to €56.2
million for the year ended December 31, 2020, as compared to revenue from collaboration and licensing
agreements of €69.0 million for the year ended December 31, 2019. Revenue from collaboration and
licensing agreements mainly resulted from the agreements with AstraZeneca signed in April 2015,
October 2018 and September 2020. Revenue from collaboration and licensing agreements is set forth in
the table below.
Proceeds from collaboration and licensing agreements
of which monalizumab agreement
of which IPH5201 agreement
of which Sanofi agreement
Proceeds from collaboration and licensing agreements
Invoicing of research and development costs (IPH5201 and IPH5401 agreements)
Exchange gains (loss) on collaboration agreements
Others
Revenue from collaboration and licensing agreements
Year ended December 31,
2019
2020
(in thousands)
€ 42,541
18,816
—
€ 33,620
13,418
7,000
61,356
54,038
6,949
658
10
2,531
(602)
188
€ 68,974
€ 56,155
Proceeds related to monalizumab. Revenue related to monalizumab decreased by €8.9 million, or 21%,
to €33.6 million for the year ended December 31, 2020, as compared to €42.5 million for the year ended
138
December 31,2019. This decrease is mainly explained by the decrease in direct monalizumab research
and development costs over the period, in connection with the end of the recruitement of Phase 2 Cohort
2 during 2019. Progress was assessed on the basis of recognized costs relative to the total costs incurred
for these studies. As of December 31, 2020, the deferred revenue related to monalizumab amounted to
€26.6 million (€11.3 million as “Deferred revenue—Current portion” and €15.3 million as “Deferred
revenue—Non-current portion”).
Proceeds related to IPH5201. Revenue related to IPH5201 decreased by €5.4 million, or 28.7%, to
€13.4 million for the year ended December 31, 2020, as compared to €18.8 million for the year ended
December 31, 2019. As of December 31, 2020, since the Company had fulfilled all of its commitments
on preclinical work related to the start of Phase 1 of the IPH5201 program, the initial payment of $50.0
million and the milestone payment of $5.0 million were fully recognized in revenue.
Invoicing of research and development costs & avdoralimab. Pursuant to our agreements with
AstraZeneca, clinical costs for the ongoing Stellar Phase I trial testing avdoralimab in oncology are
equally shared between us and AstraZeneca and research and development costs related to IPH5201 are
fully borne by AstraZeneca, These costs are re-invoiced on a quarterly basis.
Revenue from invoicing of research and development costs for the year ended December 31, 2020 was
€2.5 million compared to €6.9 million for the year ended December 31, 2019 , or a decrease of € 4.4
million. The decrease between the two periods is mainly explained by the decrease in research and
development costs relating to IPH5201 re-invoiced to AstraZeneca following the transition of the
program in Phase 1 clinical trial, supported AstraZeneca.
Proceeds related to Sanofi - IPH6101. On January 8, 2016, the Company announced the signing of a
collaboration and research license agreement with Sanofi. As a part of this agreement, and on December
8, 2020, Sanofi informed the Company of its intention to advance IPH6101/SAR443579 into
investigational new drug (IND)-enabling studies. This decision triggered a milestone payment of €7.0
million from Sanofi to the Company, fully recognized in revenue as of December 31, 2020.
Government financing for research expenditures
Government funding for research expenditures decreased by €3.2 million, or 19%, to €13.6 million for
the year ended December 31, 2020, as compared to €16.8 million for the year ended December 31, 2019.
The change is mainly due to a decrease in amortization expense relating to the intangible assets related to
the IPH5201 rights and monalizumab. The table below details government funding for research
expenditures for the years ended December 31, 2019 and 2020.
Research Tax Credit
Grant
Government financing for research expenditures
Year ended December 31,
2019
2020
(in thousands)
€ 16,737
103
€ 13,084
534
€ 16,840
€ 13,618
The research tax credit is calculated as 30% of the amount of research and development expenses, net of
grants received, eligible for the research tax credit for the fiscal year.
139
Sales
As of December 31, 2020 , following the end of the transition period relating to the commercialization of
Lumoxiti in the United States on September 30, 2020, the Company recognized net sales of Lumoxiti for
the fourth quarter for an amount of €0.7 million.
Operating expenses
The table below presents our operating expenses for the years ended December 31, 2020 and 2019.
Research and development
Selling, general and administrative
Impairment of intangible assets
Total operating expenses
Research and development expenses
Year ended December 31,
2019
2020
(in thousands)
€ (78,844)
(25,803)
—
€ (58,613)
(31,246)
(43,529)
€ (104,647)
€ (133,388)
Our research and development expenses are broken down as set forth in the table below for the years
ended December 31, 2019 and 2020.
Lacutamab
Monalizumab
Avdoralimab
Lumoxiti(1)
Sub-total programs in clinical development
Sub-total programs in preclinical development
Total direct research and development expenses
Personnel expenses (including share-based payments)
Depreciation and amortization
Other expenses
Personnel and other expenses
Year ended December 31,
2019
2020
(in thousands)
(9,870)
€ (6,195)
(5,887)
(11,709)
(33,661)
(10,741)
(9,801)
€ (3,851)
(4,650)
(4,558)
(22,860)
(5,133)
(44,401)
(27,993)
(15,892)
(15,518)
(3,033)
(34,443)
(15,231)
(12,006)
(3,383)
(30,620)
Total research and development expenses
€ (78,844)
€ (58,613)
(1) Lumoxiti research and development expenses for the year ended 2019 mainly relate to the generation
of additional clinical data and the preparation of the submission of the marketing authorization
application to the EMA.
140
Research and development expenses decreased by €20.2 million, or 25.7%, to €58.6 million for the year
ended December 31, 2020, as compared to research and development of €78.8 million for the year ended
December 31, 2019. This decrease mainly results from a decrease of €16.4 million in direct research and
development expenses (clinical and non-clinical) and a decrease of €3.5 million in research and
development depreciation and amortization of intangible assets acquired by the Company. Research and
development expenses represented a total of 65.2% and 75.3% of operating expenses for years ended
December 31, 2020 and December 31, 2019, respectively.
Direct research and development expenses decreased by €16.4 million, or 37.0%, to €28.0 million for the
year ended December 31, 2020, as compared to direct research and development expenses of € €44.4
million for the year ended December 31, 2019. This decrease is mainly due to: (i) a €7.2 million decrease
in expenses related to the Lumoxiti program, (ii) a €5.6 million decrease in expenses related to non-
clinical development program, (iii) a €2.3 million decrease in expenses related to the monalizumab
program. The decrease in clinical expenses related to Lumoxiti is mainly due to the completion of work in
2019 in preparation for regulatory submission in Europe. The decrease in preclinical expenses is mainly
explained by the finalization of work related to IPH5201 and IPH5301.
Personnel and other expenses allocated to research and development decreased by €3.8 million, or 11.1%,
to €30.6 million for the year ended December 31, 2020, as compared to an amount of €34.4 million for
the year ended December 31, 2019. This decrease is mainly due to the decrease by €3.5 million in
amortization relating to monalizumab rights (extension of the depreciation horizon due to a mechanical
adjustment after the completion of a cohort in 2020) and IPH5201 rights (full amortization at December
31, 2020).
As of December 31, 2020, we had 164 employees in research and development functions, compared to
162 as of December 31, 2019.
Selling, general and administrative expenses
Selling, general and administrative expenses increased by €5.4 million, or 21.1%, to €31.2 million for the
year ended December 31, 2020, as compared to €25.8 million for the year ended December 31, 2019.
Selling, general and administrative expenses represented a total of 34.8% and 24.7% of our total operating
expenses for the years ended December 31, 2020 and 2019, respectively.
The table below presents our selling, general and administrative expenses by nature for the years ended
December 31, 2019 and 2020:
Year ended December 31,
2019
2020
(in thousands)
€ (10,572)
€ (12,714)
(8,384)
(6,847)
(9,075)
(9,457)
€ (25,803)
€ (31,246)
Personnel expenses (including share based payments)
Non scientific advisory and consulting
Other expenses (1)
Total selling, general and administrative
141
(1) Other expenses are related to intellectual property, maintenance costs for laboratory equipment and
our headquarters, depreciation and amortization and other selling, general and administrative
expenses.
Personnel expenses, which includes the compensation paid to our employees and consultants, increased
by €2.1 million, or 20.3%, to €12.7 million for the year ended December 31, 2020, as compared to
personnel expenses of €10.6 million for the year ended December 31, 2019. This increase mainly results
from an increase in wages and salaries of €3.3 million, resulting from the full-year effect of personnel
costs related to our US subsidiary, including personnel assigned to Lumoxiti commercial activities.
This increase is partially offset by the drop in share-based payments by €1.2 million. As of December 31,
2020, we had 64 employees in general and administrative functions, as compared to 65 as of December
31,2019.
Non-scientific advisory and consulting expenses mostly consist of auditing, accounting, legal and hiring
services. These expenses increased by €0.7 million, or 8.2%, to €9.1 million for the year ended December
31,2020, compared to an amount of €8.4 million for the year ended December 31, 2019. This increase
results mainly from the costs incurred for the marketing of Lumoxiti and the operation of our US
subsidiary until the decision to return the US and EU commercialization rights to AstraZeneca at the end
of 2020.
Other selling, general and administrative expenses relate to intellectual property, the costs of maintaining
laboratory equipment and our premises, depreciation and amortization and other general, administrative
and commercial expenses. It notably includes insurance costs, that increased following the listing of the
Company in the US in October 2019.
Impairment of intangible assets
As of December 31, 2020, impairment of intangible assets consist of to the full depreciation of Lumoxiti
rights for an amount of €43.5 million, following the Company's decision to return the US and EU
commercialization rights of Lumoxiti to AstraZeneca.
Net income (loss) from distribution agreements
When product sales are performed by a partner in the context of collaboration or transition agreements,
the Company must determine if the partner acts as an agent or a principal. The Company concluded that
AstraZeneca acted as a principal in the context of the production and commercialization of Lumoxiti until
September 30, 2020. Consequently, the global inflows and outflows received from or paid to AstraZeneca
are presented on a single line in the statement of income of Innate Pharma. This amount does not include
the R&D costs which are recognized as R&D operating expenses.
We recognized a net income of €0.9 million from the Lumoxiti license agreement in the year ended
December 31, 2020, covering the first three quarters, to be compared to a net loss of €8.2 million for the
year ended December 31, 2019, which reflected revenue from sales of Lumoxiti in the period, less
administrative and selling expenses associated with the sales revenue allocated to us, following the sale in
the United States.
As of December 31, 2020, following the end of the transition period for the commercialization of
Lumoxiti in the United States on September 30, 2020, the Company recognized fourth quarter net sales of
Lumoxiti in the total amount of €0.7 million.
Financial income (loss), net
142
Net financial result decreased by €8.2 million, to a €1.9 million loss for the year ended December 31,
2020, as compared to a €6.3 million gain for the year ended December 31, 2019. This change results
mainly from the change in the fair value of certain financial instruments (gain of €4.1 million in 2019 as
compared to a loss of €0.6 million in 2020) and a net foreign exchange loss of €1,6 million in 2020 as
compared to a net foreign exchange gain of €0.8 million in 2019.
The table below presents the components of our net financial result for the years ended December 31,
2019 and 2020:
Interests and gains on financial assets
Unrealized gains on financials assets
Foreign exchange gains
Other financial income
Financial income
Foreign exchange losses
Unrealized losses on financial assets
Interest on financial liabilities
Other financial expenses
Financial expenses
Net financial income (loss)
Year ended December 31,
2019
2020
(in thousands)
€ 1,620
4,063
5,568
18
11,269
(4,772)
—
(204)
(1)
€ 564
313
3,978
—
4,855
(5,557)
(865)
(341)
—
(4,976)
(6,763)
€ 6,293
€ (1,908)
For the years ended December 31, 2019 and 2020, the foreign exchange gains and losses mainly result
from the variance of the exchange rate between the Euro and the U.S. dollar on U.S. dollar-denominated
cash and cash equivalents, short-term investments and financial assets. Unrealized gains and losses on
financial assets relate to unquoted instruments.
Comparisons for the years ended December 31, 2018 and 2019
The following table sets forth a summary of our consolidated statements of income (loss) for the periods
presented.
143
Revenue from collaboration and licensing agreements
Government financing for research expenditures
Revenue and other income
Research and development
Selling, general and administrative
Operating expenses
Net income (loss) from distribution agreements
Operating income (loss)
Financial income
Financial expenses
Net financial income (loss)
Net income (loss) before tax
Income tax expense
Net income (loss)
Year ended December 31,
2019(1)
2018
(in thousands)
€ 79,892
14,060
€ 68,974
16,840
93,952
85,814
(69,555)
(18,142)
(78,844)
(25,803)
(87,697)
(104,647)
(1,109)
(8,219)
5,146
(27,052)
6,002
(8,429)
11,269
(4,976)
(2,427)
6,293
2,718
333
(20,759)
—
€ 3,049
€ (20,759)
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the
impacts of the adoption of IFRS 16 that became applicable on January 1, 2019. The Company
applied the modified retrospective transition method. As a consequence, the comparative
consolidated financial information as of and for the years ended December 31, 2018 have not
been restated. See Note 2.f to our consolidated financial statements appearing elsewhere in this
Annual Report.
Revenue and other income
Revenue and other income resulted from collaboration and licensing agreements and government
financing for research expenditure. Revenue and other income decreased by €8.1 million, or 8,7 %, to
€85.8 million for the year ended December 31, 2019, as compared to revenue and other income of €94.0
million for the year ended December 31, 2018.
144
Revenue from collaboration and licensing agreements
Government financing for research expenditures
Revenue and other income
Year ended December 31,
2018
2019
(in thousands)
€ 79,892
14,060
€ 68,974
16,840
€ 93,952
€ 85,814
Revenues from collaboration and licensing agreements
Revenues from collaboration and licensing agreements decreased by €10.9 million, or 13.7%, to €69.0
million for the year ended December 31, 2019, as compared to revenues from collaboration and licensing
agreements of €79.9 million for the year ended December 31, 2018. These revenues were derived
principally under our agreements with AstraZeneca and are set forth in the table below.
Proceeds from collaboration and licensing agreements:
Monalizumab agreement
IPH5201 agreement
Proceeds from collaboration and licensing agreements
Invoicing of research and development (IPH5201 and avdoralimab agreements)
Exchange gains on collaboration and licensing agreements
Others
Revenue from collaboration and licensing agreements
Year ended December 31,
2018
2019
(in thousands)
€ 61,546
15,632
€ 42,541
18,816
77,178
61,356
2,242
465
7
6,949
658
10
€ 79,892
€ 68,974
145
Proceeds related to monalizumab. Revenue related to monalizumab decreased by €19.0 million, or
30.9%, to €42.5 million for the year ended December 31, 2019, as compared to €61.5 million for the year
ended December 31, 2018. This change is primarily due to the one-off impact of the exercise of the option
by AstraZeneca ($100.0 million) in October 2018, which generated a catch-up impact in revenue of €32.0
million and €6.4 million in the years ended December 31, 2018 and 2019, respectively. . As of December
31, 2019, the deferred revenue related to monalizumab is €62.7 million (€39.7 million as “Deferred
revenue—Current portion” and €22.9 million as “Deferred revenue—Non-current portion”).
Proceeds related to IPH5201. Revenue related to IPH5201 increased by €3.2 million, or 20.4%, to
€18.8 million for the year ended December 31, 2019, as compared to €15.6 million for the year ended
December 31, 2018. This change is primarily due to revenue related to the partial recognition in 2019 of
the $50.0 million non-refundable upfront payment received from AstraZeneca in 2018, which has been
recognized as revenue based on the percentage of completion of the development work. As of December
31, 2019, the amount not yet recognized in revenue amounted to €9.1 million, classified as “Deferred
revenue—Current portion.”
Invoicing of research and development costs. Revenue from invoicing of research and development
costs for the year ended December 31, 2019 was €6.9 million compared to €2.2 million for the year ended
December 31, 2018. Pursuant to our agreements with AstraZeneca, clinical costs for the ongoing Phase I
trial of avdoralimab in combination with durvalumab are equally shared between us and AstraZeneca and
research and development costs related to IPH5201 are fully borne by AstraZeneca, resulting in periodic
settlement invoices.
Government financing for research expenditures
Government financing for research expenditures increased by €2.8 million, or 19.8%, to €16.8 million for
the year ended December 31, 2019, as compared to €14.1 million for the year ended December 31, 2018.
This change is primarily a result of an increase in the research tax credit of €3.2 million, which is mainly
due to an increase in the amortization expense relating to the intangible assets related to the licenses
acquired from AstraZeneca in October 2018. The table below details government funding for research
expenditures for the years ended December 31, 2018 and 2019.
Research tax credits
Grants
Government financing for research expenditures
Year ended December 31,
2018
2019
(in thousands)
€ 13,527
533
€ 16,737
103
€ 14,060
€ 16,840
The research tax credit is calculated as 30% of the amount of research and development expenses, net of
grants received, eligible for the research tax credit for the years ended December 31, 2018 and 2019.
Operating expenses
The table below presents our operating expenses for the years ended December 31, 2018 and 2019.
146
Research and development
Selling, general and administrative
Total operating expenses
Year ended December 31,
2018
2019
(in thousands)
€ 69,555
18,142
€ 78,844
25,803
€ 87,697
€ 104,647
Research and development expenses
Our research and development expenses in the periods presented primarily relate to activities for our
monalizumab, lacutamab and avdoralimab programs and Lumoxiti.
Our research and development expenses are broken down as set forth in the table below:
Monalizumab
Lacutamab
Avdoralimab
Lumoxiti(1)
Sub-total programs in clinical development
Sub-total programs in preclinical development
Total direct research and development expenses
Personnel expenses (including share-based payments)
Depreciation and amortization
Other expenses
Personnel and other expenses
Total research and development expenses
Year ended December 31,
2018
2019
(in thousands)
€ 8,794
15,019
9,883
1,094
34,790
11,356
46,146
14,226
6,709
2,474
23,409
€ 69,555
€ 6,195
9,870
5,887
11,709
33,660
10,741
44,401
15,892
15,518
3,033
34,443
€ 78,844
(1) Lumoxiti research and development expenses mainly relate to the generation of additional clinical
data and the preparation of the submission of the marketing authorization application to the EMA.
147
Research and development increased by €9.3 million, or 13.4%, to €78.9 million for the year ended
December 31, 2019, as compared to research and development of €69.6 million for the year ended
December 31, 2018. This increase change is primarily a result of an increase of €11.0 million euros in
personnel and other expenses, partly offset by a decrease of €1.7 million euros in direct research and
development expenses (clinical and non-clinical).
Research and development expenses represented a total of 79.4% and 75.3% of the total operation
expenses for the years ended December 31, 2018 and 2019, respectively. As of December 31, 2018, we
had 154 employees in research and development functions, compared to 162 as of December 31, 2019.
Direct research and development expenses decreased by €1.7 million, or 3.9%, to €44.4 million for the
year ended December 31, 2019, as compared to direct research and development expenses of €46.1
million for the year ended December 31, 2018. This change is primarily a result of: (i) a €5.1 million
decrease in expenses related to the lacutamab program, (ii) a €4.0 million decrease in expenses related to
the avdoralimab program, (iii) a €2.6 million decrease in expenses related to the monalizumab program,
partially offset by (iv) a €10.6 million increase in expenses related to the acquisition of Lumoxiti. The
decrease in expenses related to the lacutamab and avdoralimab programs mainly results from €7.5 million
decrease in chemical, manufacturing and production control costs due to the phasing of the production on
batches.
Personnel and other expenses increased by €11.0 million, or 47.1%, to €34.3 million for the year ended
December 31, 2019, as compared to personnel and other expenses of €23.4 million for the year ended
December 31, 2018. This change is primarily a result of (i) a €8.8 million increase in depreciation and
amortization expenses due to the full year impact of the amortization of Lumoxiti (€2.3 million) and
IPH5201 (€6.5 million) and (ii) a €1.7 million increase in personnel expenses (including share-based
compensation) due to the increase in employee headcount and bonuses (€1.4 million) and share-based
payments (€0.3 million).
Selling, general and administrative expenses
Selling, general and administrative expenses increased by €7.7 million, or 42.2%, to €25.8 million for
the year ended December 31, 2019, as compared to €18.1 million for the year ended December 31, 2018.
Selling, general and administrative expenses represented a total of 20.7% and 24.7% of our total operating
expenses for the years ended December 31, 2018 and 2019, respectively.
The table below presents our selling, general and administrative expenses by nature for the years ended
December 31, 2018 and 2019:
Year ended December 31,
2018
2019
(in thousands)
€ 7,601
5,301
5,240
€ 10,572
8,384
6,847
€ 18,142
€ 25,803
Personnel expenses (including share-based payments)
Non scientific advisory and consulting
Other expenses(1)
Total selling, general and administrative
148
(1) Other expenses are related to intellectual property, maintenance costs for laboratory equipment and
our headquarters, depreciation and amortization and other selling, general and administrative
expenses.
Personnel expenses, which includes the compensation paid to our employees and consultants, increased
by €3.0 million, or 39.1%, to €10.6 million for the year ended December 31, 2019, as compared to
personnel expenses of €7.6 million for the year ended December 31, 2018. This increase mainly results
from an increase in wages and salaries of €2.1 million, resulting from the recruitment of employees for
our US subsidiary (€1.7 million), including employees affected to the commercialization of Lumoxiti. As
of December 31, 2019, we had 65 employees in general and administrative functions, as compared to 41
as of December 31, 2018. This change is primarily a result of the recruitment of 20 employees for our US
subsidiary.
Non-scientific advisory and consulting expenses mostly consist of auditing, accounting, taxation and legal
fees as well as consulting fees in relation to business strategy and operations and hiring services. Non-
scientific advisory and consulting expenses increased by €3.1 million, or 58.1%, to €8.4 million for the
year ended December 31, 2019 as compared to €5.3 million for the year ended December 31, 2018. This
increase mainly results from fees incurred for the commercialization of Lumoxiti and the development of
the activities of our US affiliate.
Net income (loss) from distribution agreements
We recognized a net loss of €8.2 million from the Lumoxiti distribution agreement in the year ended
December 31, 2019, as compared to a net loss of €1.1 million for the year ended December 31, 2018,
which reflected revenue from sales of Lumoxiti in the period, less administrative and selling expenses
associated with the sales revenue allocated to us. The commercial launch of Lumoxiti in the U.S. occurred
in November 2018 (although revenue derived from such sales was recognized over a 12 month period in
2019) and is in its ramp-up phase.
Financial income (loss), net
Net financial result increased by €8.7 million, to a €6.3 million gain for the year ended December 31,
2019, as compared to €2.4 million loss for the year ended December 31, 2018. This increase is mainly due
to a €4.1 million gain relating to the change in valuation allowance on financial instruments (as compared
to a €3.9 million loss for the year ended December 31, 2018).
The table below presents the components of our net financial result for the years ended December 31,
2018 and 2019:
149
Gains on financial assets
Unrealized gains on financial assets
Foreign exchange gains
Other financial income
Financial income
Unrealized losses on financial assets
Foreign exchange losses
Interest on financial liabilities
Other financial expenses
Financial expenses
Net financial loss
Year ended December 31,
2018
2019
(in thousands)
€ 1,582
€ 1,620
—
4,068
352
6,002
(3,942)
(3,851)
(102)
(534)
4,063
5,568
18
11,270
—
(4,772)
(204)
(1)
(8,429)
(4,976)
€ (2,427)
€ 6,293
For the years ended December 31, 2018 and 2019, the foreign exchange gains and losses mainly result
from the variance of the exchange rate between the Euro and the U.S. dollar on U.S. dollar-denominated
cash and cash equivalents and financial assets.
Unrealized gains and losses on financial assets relate to unquoted instruments.
150
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with IFRS. Some of the accounting
methods and policies used in preparing the financial statements under IFRS are based on complex and
subjective assessments by our management or on estimates based on past experience and assumptions
deemed realistic and reasonable based on the facts and circumstances. The actual value of our assets,
liabilities and shareholders’ equity as well as our income and expenses could differ from the value derived
from these estimates if conditions changed and these changes had an impact on the assumptions adopted.
See Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report.
We believe that the most significant management judgments and assumptions in the preparation of our
consolidated financial statements are described below.
Accounting for collaboration and licensing arrangements
To date, our revenue has been generated primarily from payments received in relation to research,
collaboration and licensing agreements signed with pharmaceutical companies. These contracts generally
provide for components such as upfront payments, milestone payments upon reaching certain
predetermined development objectives, research and development funding, as well as payment of
royalties on future sales of products.
Non-refundable upfront payments are deferred and recognized as revenue over the period we are engaged
to deliver services to the third-party. Revenue is recognized based on completion of the underlying work.
Milestone payments represent amounts received from our collaborators, the receipt of which is dependent
upon the achievement of certain scientific, regulatory, or commercial milestones. We recognize milestone
payments when the triggering event has occurred, there are no further contingencies or services to be
provided with respect to that event, and the counterparty has no right to refund of the payment. The
triggering event may be scientific results achieved by us or another party to the arrangement, regulatory
approvals, or the marketing of products developed under the arrangement.
Estimate of the recoverable amount of the acquired and under progress licenses
Impairment tests are performed on a yearly basis for the intangible assets which are not amortized (such
as intangible assets in progress). We test amortizable intangible assets for impairment when there is an
indicator of impairment. Impairment tests involve comparing the recoverable amount of the licenses to
their net book value. The recoverable amount of an asset is the higher of its fair value less costs to sell and
its value in use. If the carrying amount of any asset is above its recoverable amount, we recognize an
impairment loss to reduce the carrying amount to the recoverable amount. The main assumptions used for
the impairment test include (a) the amount of cash flows that are set on the basis of the development and
commercialization plans and budgets approved by Management, (b) assumptions related to the
achievement of the clinical trials and the launch of the commercialization, (c) the discount rate, (d)
assumptions on risk related to the development and (e) for the commercialization, selling price and
volume of sales, and are provided in Note 6 to our consolidated financial statements which are included
elsewhere in this Annual Report. Any change in these assumptions could lead to the recognition of an
impairment charge that could have a significant impact on our consolidated financial statements.
In case of failure of the clinical trials in progress, we may have to fully depreciate the intangible asset.
151
Estimate of the useful life of the acquired licenses
Intangible assets are amortized on a straight line basis over their anticipated useful life. The estimated
useful life is the period over which the asset provides future economic benefits. It is estimated by
management and is regularly revised by taking into consideration the period of development over which it
expects to receive economic benefits such as collaboration revenues, royalties and product of sales.
However, given the uncertainty surrounding the duration of the research and development activities for
the programs in development and their likelihood to generate future economic benefits to the company,
the estimated useful life of the rights related to these programs is rarely longer than the actual
development phase of the product candidate. When a program is in commercialization phases, the useful
life takes into account the protection of the exclusivity rights and the anticipated period of
commercialization without taking into account any extension or additional patents.
B.
Liquidity and Capital Resources
The liquidity and capital resources discussion that follows contains certain estimates as of the date of this
Annual Report of our estimated future sources and uses of liquidity (including estimated future capital
resources and capital expenditures) and future financial and operating results. These estimates reflect
numerous assumptions made by us with respect to industry performance, general business, economic,
regulatory, market and financial conditions and other future events, and matters specific to our businesses,
all of which are difficult or impossible to predict and many of which are beyond our control.
Sources and uses of liquidity
We have primarily financed our operations through our receipt of $530.0 million (€461.7 million) in
payments from our collaborators, including AstraZeneca, since 2011, excluding payments received for
purchases of our equity securities by our collaborators.
We have also financed our operations since our inception through several rounds of public and private
financings. Since our inception, we have raised a total of €306.4 million through the sale of equity
securities, including €33.7 million in the initial public offering of our ordinary shares on Euronext Paris in
2006 and €66.0 million in the initial public offering of our initial public offering of our ordinary shares on
Nasdaq New-York in 2019.
In addition, we have received an aggregate of €80.6 million in research tax credits through December 31,
2020. As a French biopharmaceutical company, we have benefited from certain tax advantages, including,
for example, the research tax credit. The research tax credit can be offset against French corporate income
tax due and the portion in excess, if any, may be refunded. The research tax credit is calculated based on
our claimed amount of eligible research and development expenditures in France. The research tax credit
decreased by €3.7 million, or 19% , to €13.1 million for the year ended December 31, 2020, as compared
to a research tax credit of €16.7 million for the year ended December 31, 2019.
Until December 31, 2018, we qualified as a small or medium size business. Therefore, the French
Treasury refunded our 2017 and 2018 research tax credit claims during 2018 and 2019, respectively, and
we received reimbursement of the 2018 research tax credit in compliance with the applicable regulatory
rules in July 2019. We lost our status as a small or medium size business at the end of the year ended
December 31, 2019 and, therefore, we will no longer be entitled to the immediate reimbursement of the
Research Tax Credit but instead will be reimbursed within the expiry of a three-year period.
We are potentially eligible to earn a significant amount of milestone payments and royalties under our
agreements with AstraZeneca in the event that we satisfy certain pre-specified milestones. We may enter
into new collaboration agreements that also provide milestone payments. These milestone payments are
dependent on the accomplishment of various development, regulatory and commercialization objectives,
and the achievement of many of these milestones is outside of our control. However, our ability to earn
152
these payments and their timing will, in part, be dependent upon the outcome of our research activities
which is uncertain at this time.
On July 3, 2017, we borrowed from the bank Société Générale in order to finance the construction of our
future headquarters. This loan, amounting to a maximum of €15.2 million, can be drawn down during the
period of the construction in order to pay supplier payments as they become due, but in any event no later
than August 30, 2019. We have decided to postpone this construction. Until this construction begins, the
proceeds of the loan will be used to finance several projects, such as extension of our current building,
improvement of our information systems and development of our commercial infrastructure. Repayment
of any amounts drawn down are payable over a 12-year term beginning on August 30, 2019 and ending
on August 30, 2031. As security for the loan, we pledged collateral in the form of financial instruments
held at Société Générale amounting to €15.2 million. The security interest on the pledged financial
instruments will be released in accordance with the following schedule: €4.2 million in July 2024, €5.0
million in July 2027 and €6.0 million in July 2031. We had drawn down €15.2 million under the loan as
of December 31, 2019. The loan bears a fixed interest rate of 2.01%. Under the loan, we are subject to a
covenant that our total cash, cash equivalents and current and non-current financial assets as of each fiscal
year end will be at least equal to the amount of outstanding principal under the loan. The repayment
period started on August 30, 2019. As of December 31, 2020, the remaining capital this loan amounted to
€13.7 million as compared to €14.8 million as of 31 December, 2019.
We leased our headquarters in Luminy, Marseille, France under a finance lease agreement, ended in June
2020. In addition, we obtained a €1.5 million PTZI loan (Prêt à Taux Zéro Innovation—interest-free loan
for innovation) from Banque Publique d’Investissement, or BPI France, in 2013. The loan is repayable
beginning in September 2016 over five years and amounted to €0.2 million as of December 31, 2020.
Lastly, during the years ended December 31, 2016 and 2017, we also used lease-financing and bank loans
to finance the acquisition of laboratory equipment and to set up new laboratories. The debt related to these
loans amounts to €0.9 million at December 31, 2020.
Liquidity position
Cash, cash equivalents and short-term investments decreased by €67.3 million, or 30,7 %, to €151.6
million as of December 31, 2020, as compared to cash, cash equivalents and short-term investments of
€218.9 million as of December 31, 2019. Cash and cash equivalents are mainly composed of current bank
accounts, interest-bearing accounts and fixed-term accounts.. Short-term investments primarily consist of
shares of money market funds and mutual funds. Their purpose is to finance our activities, including our
research and development costs.
As a reminder, We have received a total of €306.4 million from capital increases, before deducting the
costs associated with capital increases, and after excluding proceeds from share compensation
instruments, between 1999 and December 31, 2019. The table below summarizes the main capital
increases between 1999 and December 31, 2020.
153
Date
April 2000
March 2001
July 2002
March 2004
July 2004
March 2006
November 2006
December 2009
November 2013
June 2014
October 2018
October 2019
Total
Cash flows
Gross Proceeds
€ 1.2 million
3.3 million
20.0 million
5.0 million
10.0 million
10.0 million
33.7 million
24.3 million
20.3 million
50.0 million
62.6 million
66.0 million
€ 306.4 million
Comparisons for the year ended December 31, 2019 and 2020
The following table sets forth cash flow data for the years ended December 31, 2019 and 2020:
Cash flows from / (used in) operating activities
Cash flows from / (used in) investing activities
Cash flows from / (used in) financing activities
Effect of the exchange rate changes
Net increase / (decrease) in cash and cash equivalents
Year ended December 31,
2019
2020
(in thousands)
€ 34,924
(62,121)
77,765
5
€ (51,767)
(13,370)
(1,177)
219
€ 50,572
€ (66,096)
Cash flows from / (used in) operating activities
Our net cash flow used in operating activities decreased by €86.7 million to €51.8 million for the year
ended December 31, 2020 as compared to net cash flows from operating activities of €34.9 million for the
year ended December 31, 2019. This decrease mainly results from the collection of €108.8 million of
proceeds persuant to the agreements signed with AstraZeneca in January 2019 and related to
monalizumab and IPH5201. The company also received, in December 2020, a milestone payment of
154
$50.0m (€41.2m) following the inclusion by AstraZeneca of the first patient in the Phase 3 clinical trial
INTERLINK-1 and In April 2020, €4.6 million payment from AstraZeneca following the dosing of the
first patient in the IPH5201 Phase 1 clinical trial. Theses proceeds are offset by an increase of outflows in
relation with our operating activities.
Cash flows from / (used in) investing activities
Our net cash flows used in investing activities for the year ended December 31, 2020 were €13.4 million
which mainly resulted from (i) a €13.4 million ($15.0 million) additional consideration paid, in January
2020, to AstraZeneca regarding Lumoxiti following the submission of the Biologics License Application
to the European Medicine Agency (EMA) in November 2019 (ii) a €2.7 million additional consideration
paid to Orega Biotech in April 2020 relating to IPH5201 following the dosing of a first patient in a Phase
1 clinical trial, in march 2020 and (iii) the acquisition of financial assets for a net amount of €3.0 million.
Such items were partially offset by the reimbursement by AstraZeneca in relation to the 2019 cost sharing
mechanism for the commercialization of Lumoxiti (€7.0 million).
Our net cash flows used in investing activities for the year ended December 31, 2019 were €62.1 million
and mainly consisted of the upfront payment relating to the acquisition of Lumoxiti (€43.8 million) and
the additional considerations relating to monalizumab (€13.1 million) and anti-CD39 (€7.0 million).
Cash flows from / (used in) financing activities
Our net cash flows from financing activities for the year ended December 31, 2020 decreased by €78.9
million to €1.2 million for year ended December 31, 2020 as compared to net cash flows from financing
activities of €77.8 million for the year ended December 31, 2019. On August 11, 2020, following the
signing of a financing contract with BpiFrance Financement as part of the program set up by the French
government to help develop a therapeutic solution with a preventive or curative aim against COVID-19,
the Company received a repayable advance of €1.4 million. Loan repayments amounted to €2.2 million
for the year ended December 31, 2020 compared to €2.0 million for the year ended December 31, 2019.
As a reminder, the net proceeds of our initial public offering on the Nasdaq in October 2019 were €66.0
million.
Comparisons for the year ended December 31, 2018 and 2019
Cash flows from / (used in) operating activities
Cash flows from / (used in) investing activities
Cash flows from / (used in) financing activities
Effect of the exchange rate changes
Net increase / (decrease) in cash and cash equivalents
Year ended December 31,
2018
2019
(in thousands)
€ (32,529)
24 279
61,222
(26)
€ 34,924
(62 121)
77,765
5
€ 52,947
€ 50,572
The following table sets forth cash flow data for the years ended December 31, 2018 and 2019:
Cash flows from / (used in) operating activities
Our net cash flow from operating activities increased by €67.5 million to €34.9 million for the year ended
December 31, 2019 as compared to net cash flows used in operating activities of €32.5 million for the
155
year ended December 31, 2018. This improvement of our operating cash flows mainly results from the
collection of €108.7 million of proceeds relating to the agreements signed with AstraZeneca in October
2018, partially offset by an increase of outflows in relation to our research and development activities.
Cash flows from / (used in) investing activities
Our net cash flows used in investing activities for the year ended December 31, 2019 were €62.1 million
and mainly consisted of the upfront payment relating to the acquisition of Lumoxiti (€43.8 million) and
the additional considerations relating to monalizumab (€13.1 million) and anti-CD39 (€7.0 million).
Our net cash flows from investing activities for the year ended December 31, 2018 were €24.3 million
and mainly consisted of (i) disposal of net financial assets for €24.2 million, (ii) interest received on
financial assets for €1.4 million, less (iii) acquisitions of property and equipment for €0.9 million and (iv)
acquisition of intangible assets for €0.6 million.
Cash flows from / (used in) financing activities
Our net cash flows from financing activities for the year ended December 31, 2019 increased by €16.6
million to €77.8 million as compared to net cash flows from financing activities of €61.2 million for the
year ended December 31, 2018 This increase mainly results from (i) the net proceeds of our initial public
offering on the Nasdaq in October 2019 (€66.0 million), and (ii) the net proceeds from the drawdown of
our borrowings, less repayments during the period (€11.9 million).
Funding requirements
We believe that our existing cash, cash equivalents, short-term investments and non-current financial
assets, will enable us to fund our operations for the next twelve months. We have based this estimate on
assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently
expect.
Until we can generate a sufficient amount of revenue from sale of approved products, if ever, we expect
to finance our operating activities through our existing liquidity and expected milestone payments from
collaborators.
Our present and future funding requirements will depend on many factors, including, among other things:
•
•
•
•
•
•
•
the size, progress, timing and completion of our clinical trials and preclinical studies for any
current or future product candidates, including our lead product candidates, monalizumab and
lacutamab;
the number of potential new product candidates we identify and decide to develop;
costs associated with our payment obligations to third parties in connection with our
development and potential commercialization of certain of our product candidates;
costs associated with expanding our organization;
the costs involved in filing patent applications and maintaining and enforcing patents or
defending against claims of infringement raised by third parties;
the time and costs involved in obtaining regulatory approval for our product candidates and
any delays we may encounter as a result of evolving regulatory requirements or adverse results
with respect to any of these product candidates;
selling and marketing activities undertaken in connection with the commercialization of
Lumoxiti and any other current or future product candidates, including monalizumab,
156
lacutamab, avdoralimab and IPH5201 and other product candidates, together with the costs
involved in the creation of a sales and marketing organization; and
•
the amount of revenues, if any, we may derive either directly, or in the form of milestone or
royalty payments from any future potential partnership agreements, from monalizumab,
IPH5201, or relating to our other product candidates.
For more information as to the risks associated with our future funding needs, see “Risk Factors—We
may need to raise additional funding to complete the development and any commercialization of our
product candidates, which may not be available on acceptable terms, or at all, and failure to obtain this
necessary capital when needed may force us to delay, limit or terminate our product development efforts
or other operations.”
Capital expenditures
Our operations mainly require investment in intangible assets. We acquired the rights of avdoralimab
from Novo Nordisk A/S in 2017. We paid an upfront of €40.0 million, of which €37.2 million was
contributed in new ordinary shares and €2.8 million in cash. As part of this agreement, an additional
amount of € 1.0 million was paid in October 2020 to Novo Nordisk A / S following the launch of the first
avdoralimab Phase II trial
In January 2019, we paid to AstraZeneca an initial payment for the license related to Lumoxiti ($50.0
million, or €43.8 million, using the foreign exchange rate of 1.1422 at the date of payment), and in
February 2019, we paid to Novo Nordisk A/S additional consideration relating to monalizumab ($15.0
million, or €13.1 million using the exchange of 1.1394 at the date of payment). In June 2019, we paid
€7.0 million to Orega Biotech in relation to the anti-CD39 program as consideration following the
collaboration and option agreement signed on October 22, 2018 with AstraZeneca regarding IPH5201.
Our operations generally require little investment in tangible assets because we outsource most of the
manufacturing and research activities to third parties. We lease some of our computer equipment under
operating lease agreements. We account for our payments for these items as operating expenses in the
consolidated statement of income.
Our capital expenditures in the years ended December 31, 2018, 2019 and 2020 primarily related to
laboratory equipment. Clinical research and development costs are not capitalized until marketing
authorizations are obtained.
Our corporate office in Luminy, Marseille, France is leased under a finance lease agreement signed in
2008 with Sogebail, a subsidiary of Société Générale, for an aggregate of €6.6 million. The lease-
financing agreement has a 12-year term. We have a purchase option for all of the buildings and land for
the lump sum of €1 at the end of the term of the contract on June 9, 2020, which we have exercised. The
Company now owns its corporate office in Luminy, Marseille.
Since July 2017, we also rent office space in Marseille, France under a commercial lease.
On January 10, 2020, the Company signed an amendment to the lease for the “Le Virage” building in
order to expand its premises. This amendment also extends the duration of the contractual commitment
until 2025.
C.
Research and Development
For a discussion of our research and development activities, see “Item 4.B—Business Overview” and
“Item 5.A—Operating Results.”
157
D.
Trend Information
The COVID-19 pandemic has continued to develop over the world, include the U.S. and Europe, in 2021.
We could experience or continue to experience disruptions relating to this pandemic that could severely
impact our business. The full extent, consequences, and duration of the COVID-19 pandemic and the
resulting impact on our business, financial condition and results of operations cannot be predicted as of
the date of this Annual Report. We will continue to evaluate the impact that the COVID-19 pandemic
could have on our business, financial condition and results of operations during the year ending December
31, 2021.
See “Item 4D.—Risk Factors—Risks Related to the Development and Commercialization of Lumoxiti
and Our Product Candidates—The recent global COVID-19 pandemic could adversely affect our
business, financial condition and results of operations.”
E.
Off-Balance Sheet Arrangements
During the periods presented, we did not, and we do not currently, engage in off-balance sheet financing
arrangements as defined under SEC rules, such as relationships with other entities or financial
partnerships, which are often referred to as structured finance or special purpose entities, established for
the purpose of facilitating financing transactions that are not required to be reflected on our consolidated
statement of financial position. In addition, we do not engage in trading activities involving non-exchange
traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity,
market or credit risk that could arise if we did engage in these relationships.
F.
Tabular Disclosure of Contractual Obligations
The following table summarizes our contractual obligations (principal amount only) as of December 31,
2020:
(in thousands of euro)
BPI PTZI IPH41
BPI Refundable advance - FORCE
Lease liabilities – Real estate property
Down-payment
Lease liabilities – Building "Le Virage"
Lease liabilities – Premises Innate Inc
Lease liabilities – Laboratory equipment
Lease liabilities – Vehicles
Lease liabilities - Printers
Loans – Equipment
Loan – Building
Total
≤ 1 year
2 to 5 years
included
≥ 5 years
Total
150
—
—
—
512
72
176
13
6
55
1,162
2,146
—
1,454
—
—
1,875
323
463
8
35
207
4,890
9,255
—
—
—
—
—
52
—
—
—
—
7,635
7,687
150
1,454
—
—
2,387
447
639
21
41
262
13,687
19,087
The table below summarizes our contractual obligations (principal amount and interest) as of December
31, 2020:
158
(in thousands of euro)
BPI PTZI IPH41
BPI Refundable advance - FORCE
Lease liabilities – Real estate property
Down-payment
Lease liabilities – Building "Le Virage"
Lease liabilities – Premises Innate Inc
Lease liabilities – Laboratory equipment
Lease liabilities – Vehicles
Lease liabilities - Printers
Loans – Equipment
Loan – Building
Total
≤ 1 year
2 to 5 years
included
≥ 5 years
Total
150
—
—
—
558
79
179
13
7
57
1,427
2,470
—
1,454
—
—
1,955
339
468
8
36
213
5,706
10,179
—
—
—
—
—
53
—
—
—
—
7,965
8,018
150
1,454
—
—
2,513
471
647
21
43
270
15,098
20,667
The commitment amounts in the table above are associated with contracts that are enforceable and legally
binding and that specify all significant terms, including fixed or minimum services to be used, fixed,
minimum or variable price provisions, and the approximate timing of the actions under the contracts. The
table does not include obligations under agreements that we can cancel without a significant penalty as
well as obligations under our employment benefit plans, which amounted to €4.2 million as of December
31, 2020.
As of December 31, 2020, we have non-cancellable purchase commitments for a total of €2.9 million
million with various CMOs.
In addition, we have certain obligations under the terms of research, collaboration and licensing
agreements which usually require us to bear all expenses relating to the procurement, examination and
extension procedures of patents, as well as to uphold and defend the patents and will require, according to
certain milestones, the payment of lump sums and royalties on sales to the licensor. The timing of the
obligations depends on when related milestones are reached, which cannot be anticipated.
We also signed option agreements which require us to (i) bear all expenses relating to the procurement,
examination and extension procedures of patents, as well as to uphold and defend the patents, (ii) pay a
lump sum of money as option payment and (iii) if we decide to later opt-in, to pay to the licensor of lump
sums (milestone payments) and royalties on sales.
Lastly, we signed certain agreements with collaborators, which defined the rules of joint-ownership and
the granting of rights regarding certain aspects of intellectual property. Under these contracts, we usually
bear all expenses relating to the procurement, examination and extension procedures of the patents and to
any procedure required to uphold and defend the patents. These agreements also usually require, in
exchange for a license over the share of rights owned by the co-owner, and according to certain
milestones, the payment of lump sums and royalties on sales to the co-owner. For example, we may be
obligated to pay Novo Nordisk A/S up to €20.0 million in potential regulatory milestones relating to
monalizumab and tiered mid-to-high single-digit percentage royalties on net sales of monalizumab
products, and up to an aggregate of €370.0 million upon the achievement of development, regulatory and
sales milestones relating to avdoralimab and tiered royalties ranging from a low double-digit to low-teen
percentage of net sales of avdoralimab. We may also be obligated to pay Orega Biotech up to an
additional €49.0 million in the aggregate upon the achievement of development and regulatory
milestones, and mid-single digit to low-teen percentage payments, depending on determinations relating
to Orega Biotech’s intellectual property rights for certain patents, on sublicensing revenues we receive
pursuant to our agreement with AstraZeneca relating to IPH5201. Finally, in January 2020, we made a
159
$15.0 million milestone payment as a result of the achievement of a regulatory milestone relating
Lumoxiti. We are also obligated to pay a low single digit percentage royalties on our net sales of
Lumoxiti, and are obligated to pay Selexis SA, for each of lacutamab, IPH5201 and IPH5301, up to 1.6
million Swiss francs in development and regulatory milestones and either up to 50.0 million Swiss francs
in commercial milestones or low single digit percentage royalties on net sales.
G.
Safe Harbor.
This Annual Report contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation
Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements.”
Item 6. Directors, Senior Management and Employee.
A. Directors and Senior Management.
Directors and Officers
•
The following table sets forth information concerning the members of our Executive Board and
Supervisory Board and our other executive officers as of December 31, 2020.
Name
Age
Position
Executive Board Members
Mondher Mahjoubi, M.D.
62 Chairman of the Executive Board, Chief Executive Officer, Member of
the Executive Committee
Yannis Morel, Ph.D.
47 Member of the Executive Board, EVP, Product Portfolio Strategy &
Business Development, Member of the Executive Committee
Laure-Hélène Mercier (1)
42 Member of the Executive Board, EVP, Chief Financial Officer, Member
of the Executive Committee
Supervisory Board Members
Hervé Brailly, Ph.D.
59 Chairman of the Supervisory Board
Irina Staatz-Granzer, Ph.D.
60 Member and Vice Chairman of the Supervisory Board
Jean-Yves Blay, Ph.D.
58 Member of the Supervisory Board
Gilles Brisson
68 Member of the Supervisory Board
Véronique Chabernaud, M.D.
59 Member of the Supervisory Board
Maïlys Ferrere (2)
58 Member of the Supervisory Board
Patrick Langlois, Ph.D.
75 Member of the Supervisory Board
Marcus Schindler, Ph.D.(3)
54 Member of the Supervisory Board
160
Pascale Boissel
Other Executive Officers
54 Member of the Supervisory Board
Joyson Karakunnel M.D. M.S.C
50 Member of the Executive Committee, EVP, Chief Medical Officer
Odile Belzunce
40 Member of the Executive Committee, VP Compliance, IT and Portfolio
Management
Jennifer Butler
44 Member of the Executive Committee, EVP, U.S. General Manager of
Innate Pharma US Inc.
Frédérique Brune
55 Member of the Executive Committee, VP Development, CMC and
Supply Chain
Eric Vivier, D.V.M., Ph.D.
56 Permanent Guest to the Executive Committee, SVP, Chief Scientific
Officer
Tracy Rossin
Odile Laurent
43 Member of the Executive Committee, VP, Global Head of
Communications
59 Member of the Executive Committee, VP Human Resources
(1) Laure-Hélène Mercier resigned from her position as Executive Board member on February 16, 2021. She will remain with the Company
until December 31, 2021 to ensure the transition with Frederic Lombard, the new Chief Financial Officer. Mr. Lombard joined Innate
with more than 20 years of financial experience in the pharmaceutical industry, holding senior finance roles at Ipsen, AstraZeneca and
Novartis.
(2) As representative of Bpifrance Participations, the legal entity that holds this Supervisory Board seat.
(3) As representative of Novo Nordisk A/S, the legal entity that holds this Supervisory Board seat.
Executive Board
Mondher Mahjoubi, M.D., Chief Executive Officer and Chairman of our Executive Board, was appointed
Chief Executive Officer and Chairman of our Executive Board on December 30, 2016. Prior to joining
Innate Pharma, Dr. Mahjoubi led AstraZeneca’s oncology therapy area franchise, playing an instrumental
role in the development and execution of its oncology product strategy from 2013-2016. Prior to that
role, he served as the Senior Vice President of Global Product Strategy in Oncology at Genentech from
2010-2013. He also previously held various positions as Vice President of Marketing and Medical Affairs
at Roche, Sanofi-Aventis and Rhone Poulenc Rorer. Dr. Mahjoubi is trained as a medical oncologist,
holds a M.D. from the University of Tunis (Tunisia) and university degrees in Medical Oncology from the
University of Paris Sud (France) and in Clinical Research and Methodology from the University of
Lariboisiere-Saint Louis (France). He was resident doctor at the Faculty of Medicine in Tunis and at the
Gustave-Roussy Institute in Villejuif. He is a member of the American Society of Clinical Oncology and
European Society of Medical Oncology. He is also currently an independent board member and Chairman
of the Board of Directors at PDC*line Pharma, a clinical stage biotech company developing a novel class
of anticancer vaccines.
Yannis Morel, Ph.D., member of the Executive Board and EVP, Product Portfolio Strategy and Business
Development, joined Innate in December 2001. Between 2001 and 2007, he was in R&D positions,
initially as a scientist in the immunology team, before becoming team manager, and finally becoming
responsible for research programs. From 2007, he was in charge of business development for the
161
company. Mr Morel holds a PhD in oncology from Aix-Marseille University (France) and is an alumnus
of Ecole Normale Supérieure de Cachan (France), with a BS in physical and molecular chemistry.
Laure-Hélène Mercier, member of the Executive Board and EVP, Chief Financial Officer, joined us in
2007, and was appointed Chief Financial Officer on December 30, 2016. Prior to her current position, Ms.
Mercier served as Executive Vice President Finance and was previously our Director of Investor
Relations. Prior to joining us, Ms. Mercier held positions as an equity analyst at Oddo Securities and
Natexis Bleichroeder. She has a MSc. (DEA) in Neurosciences from Université Aix-Marseille (France)
and a M.B.A. from ESSEC Business School (France). Laure-Hélène Mercier resigned from her functions
as Executive Board member on February 16, 2021. She will remain with the Company until December
31, 2021 to ensure the transition with Frederic Lombard, the new Chief Financial Officer. Mr. Lombard
joined Innate with more than 20 years of financial experience in the pharmaceutical industry, holding
senior finance roles at Ipsen, AstraZeneca and Novartis.
Supervisory Board
Hervé Brailly, Ph.D., Chairman of the Supervisory Board, is a biotech entrepreneur. He founded Innate
Pharma in 1999 and led the Company from 1999 to 2016 as Chief Executive Officer and Chairman of the
Executive Board before being appointed Chairman of the Supervisory Board in 2017. Mr. Brailly is also
CEO and co-founder of Kalsiom (immunology, Brest), Systol Dynamics SA (cardiology, Marseille) and
co-founded MI-MAbs SAS (immuno-technology, Marseille) in 2020. He is Chairman of the Board of
Directors of NH Theraguix (oncology, Grenoble) and member of the Board of Directors of Deinove
(microbiology, Montpellier). Mr. Brailly graduated from the Ecole des Mines de Paris (1983, France) and
he holds a PhD in immunology with a specialty in immune-pharmacology. During his career, he has been
involved in the governance of several public and academic bodies in the field of higher education,
research and technology transfer. He is currently Chairman of the School of Engineering of Aix-
Marseille University (AMU, France).
Irina Staatz-Granzer, Ph.D., Vice Chairman and member of the Supervisory Board, has served on our
Supervisory Board since 2009. Dr. Staatz-Granzer has held business development positions at Hermal,
Boots Healthcare International, Knoll (BASF Pharma) and as CEO of Scil Technology Gmbh, CEO of U3
Pharma AG and CEO of Blink Biomedical SAS. Ms. Staatz-Granzer also serves as Chairman of PLCD
(German Pharma Licensing Club). She founded and is currently CEO of Staatz Business Development &
Strategy. She is also Chairman of Talix Therapeutics NV and Emergence Therapeutics AG. Dr. Staaz-
Granzer received a degree in pharmacy from Philipps-Universität Marburg (Germany) and a Ph.D. from
the University of Tübingen (Germany).
Jean-Yves Blay, Ph.D., member of the Supervisory Board, has held the post of General Director of the
Centre Léon Bérard in Lyon, France, since 2014 and renewed in 2019. He became President of Unicancer
in 2019. He is President of the French Sarcoma Group and Director of the European Reference Network
for Rare Adult Cancers (EURACAN). In 2016, he became Secretary of the Oncology Commission of the
French Academy of Medicine. Between 2009 and 2012 he held the position of President of the European
Organisation for Research and Treatment of Cancer (EORTC). Prof. Blay currently holds various other
university and hospital positions. He is a member of the European Union Committee of Experts of Rare
Disease, the European Commission’s Scientific Panel for Health (SPH) and served as a Faculty
Coordinator for Sarcoma for the European Society of Medical Oncology (ESMO) between 2012 and
2016. Trained as a medical oncologist with a PhD from the University Claude Bernard in Lyon (France),
his research activities have been focused on the role of immune effector cells and cytokines in cancer.
Prof. Blay is a member of various scientific societies and academic expert groups, has been awarded
several honors and is the author of more than 200 publications over the last three years.
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Gilles Brisson, member of the Supervisory Board, has served on our Supervisory Board since 2007 and
was the Chairman until December 30, 2016. Mr. Brisson has worked in management positions at Rhône-
Poulenc and then at Aventis Pharma, where he served as Chairman of the Executive Board, Chairman of
the Supervisory Board and Europe Manager. Mr Brisson was member of the Supervisory Board of
Mutabilis Holding and the Group Carso and Chairman of the Board of Directors of MaunaKea
Technologies. He received a degree from Hautes Etudes Commerciales de Paris (France).
Véronique Chabernaud, M.D., member of the Supervisory Board, is an oncologist, a graduate of ESSEC
Business School (France) and has worked for 20 years in the pharmaceutical industry. In particular, she
was the Director of the French Oncological Operational Unit at Sanofi Aventis, a Vice President of
Marketing and Sales at Aventis Intercontinental and Europe, and Director of Oncology Global Medical
Affairs at Rhône Poulenc Rorer. She also works as a consultant for companies in the field of innovative
technologies with a high impact on public health, on a national and international level. Such companies
include Genomic Health, BioSystems International, MaunaKea Technologies, Ariana Pharma, Qynapse,
Omicure. In 2007, Dr. Chabernaud founded Créer la Vitalité, which helps companies and organizations in
the development of health innovations and prevention. Véronique Chabernaud graduated in 2017 from the
Institut Français des Administrateurs and Sciences Po Paris with a Certificate in Corporate Directorship
and has been involved in this program since 2017. Dr. Chabernaud also founded the association “Enfance
et Vitalité” which offers health workshops to children. She is also co-author of the book "Capital Humain
versus Humain Capital." Since July 2019, Véronique Chabernaud has been member of the Board of
Directors and Chairman of the Compensation and nomination committee of Groupe Bastide le confort
médical (BLC).
Maïlys Ferrere, member of the Supervisory Board, has served on our Supervisory Board since 2017 when
she was appointed after being proposed by our shareholder Bpifrance Participations. Ms. Ferrere is
Director of the Large Venture Investment team within the Innovation Division of Bpifrance. Large
Venture’s mission is to provide long term capital to innovative French companies in areas with very
strong growth with the goal of creating world leaders. The portfolio currently includes 50 companies in
life sciences, digital and environmental technologies. Prior to this position, Ms. Ferrere was an Investment
Director at the Strategic Investment Fund between 2009 and 2012. She previously had a career in
banking, focusing on equity capital markets in various financial institutions. Maïlys Ferrère is a member
of the Boards of Directors or Supervisory boards of the following companies: DBV, Sequans
Communications, MWM, Euronext Paris and Innate Pharma. She holds a degree in Business Law from
Pantheon-Sorbonne University, Paris (France) and graduated from IEP Paris (School of Higher Education
for Political Studies), and the French Society for Financial Analysts.
Patrick Langlois, Ph.D., member of the Supervisory Board, has served on our Supervisory Board since
2010 after being proposed by our shareholder Fonds Stratégique d’Investissement. Dr. Langlois has been
Associate Managing Director of PJL Conseils since 2005. Dr. Langlois worked for the Rhône-Poulenc
group starting in 1975 and was appointed the Financial Director in 1997, where he served until 1999.
From 2000 through 2004, he was Financial Director and Executive Vice President at Aventis. He received
a Ph.D. in Economics from the University of Rennes (France).
Marcus Schindler, Ph.D., (Prof. (adj.), member of the Supervisory Board, has served on our Supervisory
Board since 2018 when he was appointed after being proposed by our shareholder Novo Nordisk A/S. Dr.
Schindler is Senior Vice President and Head of Global Drug Discovery at Novo Nordisk A/S. He
oversees all of Novo Nordisk’s Research activities across all of NN’s Therapeutic Areas (diabetes,
obesity, non-alcoholic steatohepatitis (NASH), rare blood disorders, rare endocrine disorders, chronic
kidney and cardiovascular disease). In addition, he is responsible for identifying, establishing and
maintaining all external deals and collaborations up to and including Clinical Proof of Concept within all
therapy areas. Prior to this occupation, Mr Schindler was VP, Head of the Cardiovascular & Metabolic
163
Diseases Innovative Medicines Unit of Astra Zeneca (Sweden). Previously he was Head of Research for
(OSI) Prosidion, based in Oxford, UK, and has held senior positions at Boehringer Ingelheim Pharma
(Germany) and at Glaxo Wellcome’s blue skies research institute, “Glaxo Institute of Applied
Pharmacology”, Cambridge, UK. Mr Schindler received his PhD in Pharmacology from the University of
Cambridge and holds a position as adjunct Professor of Pharmacology at the University of Gothenburg.
He as co-/authored 50+ peer-reviewed research papers and is an inventor of 25 international patent
applications.
Pascale Boissel, member of the Supervisory Board, is, with more than 30 years of financial experience,
an expert in finance, audit, transactions, internal control, growth management and restructuring
operations. Her experience has been represented in a variety of industries, including: food and beverage
(Danone), building materials (Lafarge Holcim), education and, for more than 10 years now, healthcare
and biotechnology. Before, she was Chief Financial Officer of ENYO Pharma. Pascale was the Deputy-
Chief Executive Officer and Administrative and Financial Director of the BIOASTER Institute (IRT) in
the field of infectious diseases and microbiology. In 2009, Madame Boissel joined Ipsogen a listed
company developing and marketing molecular diagnostic products as Chief Financial Officer. Pascale
Boissel began her career in audit and corporate finance at PricewaterhouseCoopers Paris.
Other Executive Officers
Joyson Karakunnel, Member of the Executive Committee, EVP and Chief Medical officer, joined Innate
Pharma as Executive Vice President and Chief Medical Officer in July 2020. He is an experienced
medical oncologist and hematologist with more than 15 years of drug development expertise both in
academia and the biopharmaceutical industry. Most recently, Dr. Karakunnel served as Senior Vice
President and Chief Medical Officer at Tizona Therapeutics, where he led the development of the
company’s biotherapeutics pipeline. Prior to Tizona, he held positions with Arcus Biosciences and
AstraZeneca/MedImmune. At Arcus, he established the clinical, regulatory and safety departments, and
while at AstraZeneca/MedImmune, he served as the early-stage lung cancer lead and contributed to the
regulatory filings of IMFINZI® (durvalumab). Prior to joining the biopharmaceutical industry, he was a
clinical trial investigator at the National Cancer Institute (NCI) and team leader for the hematologic group
at Walter Reed National Military Medical Center. In addition, he was an Associate Professor at the
Uniformed Services University of the Health Sciences and a medical reviewer at the U.S. Food and Drug
Administration. Dr. Karakunnel completed his oncology and hematology fellowships at the NCI, his
medical training at Annamalai University in India and holds a Masters in Pharmacology from the
University of Maryland.
Odile Belzunce, Member of the Executive Committee, Vice President, Compliance and Operations, was
appointed as a member of our Executive Committee on January 31, 2019. Odile Belzunce joined Innate
Pharma in February 2005. She was Quality Manager during 10 years before becoming Head of
Compliance. During her career at Innate, Odile Belzunce contributed to the structuration of the processes
as the Company was growing, developing its portfolio and its activities. Odile Belzunce currently holds
the position of VP, Compliance and Operations.
Jennifer Butler, Member of the Executive Committee, Executive Vice President and U.S. General
Manager, joined us in that role in 2019. Prior to her appointment, Jennifer Butler served as Chief Business
Officer, Chief Commercial Officer and Head of US operations, responsible for global business
development and commercial strategy at Tessa Therapeutics, a clinical-stage oncology company. She
previously served for more than 10 years in various commercial roles with increasing responsibility at
AstraZeneca/MedImmune. While at AstraZeneca, she was the Global Commercial Head of Immuno-
Oncology. Ms. Butler also previously worked in strategic healthcare consulting and as an analyst in
164
Equity Capital Markets at Merrill Lynch. Ms. Butler brings more than 20 years of strategic marketing and
commercial leadership expertise across several therapeutic areas.
Frédérique Brune, Member of the Executive Committee, Vice President Development, CMC and Supply
Chain, was appointed as a member of our Executive Committee on July 1, 2019 after previously serving
as our Senior Director of Development, CMC and Pharmaceutical Operations since March 2017. Prior to
joining us, Ms. Brune served as Quality Director of Bioproduction at LFB-Biotechnologies from March
2016 to March 2017. From September 2007 to March 2016, she worked as Director of Development
programs as well as Interim Head Pharmacist at LFB-Biotechnologies. Prior to LFB-Biotechnologies, Ms.
Brune served in various roles and responsibilities from 2001 to 2007 at Pierre Fabre Research Institute,
including as Analytical Development and Quality Control Director, Pharmacist delegate and Program
Director. Ms. Brune graduated from the faculty of Pharmacy Paris XI and holds a Master of Science in
Experimental and Clinical Pharmacology from University Paris VI (France).
Eric Vivier, D.V.M., Ph.D., Permanent guest to the Executive Committee, Senior Vice President, Chief
Scientific Officer, joined us in that role in 2018. Eric Vivier is a Doctor of Veterinary Medicine (DVM)
from the Ecole Nationale Vétérinaire de Maisons-Alfort and holds a PhD in Immunology from the Paris
University (Paris XI). After completing his post-doctoral fellowship at Harvard Medical School (Dana
Faber Cancer Institute), Pr. Vivier joined the Center of Immunology at Marseille-Luminy (CIML) in
1993, becoming its director in 2008 until 2017. A pioneer in the field of innate immunity, he is one of the
four immunologists whose research led to the creation of Innate Pharma. He has twice been laureate of
the prestigious European Research Council (ERC) advanced grants. During his career, Pr. Vivier has been
a visiting professor at The Scripps Research Institute, The Rockefeller University, and The Walter and
Elisa Hall Institute. He is a member of the French National Academy of Medicine, of the Institut
Universitaire de France and of the Royal Academy of Medicine of Belgium. He is on the board of
numerous committees and has been awarded several prices and honors, including the European
Federation of Immunological Society award and the Grand Prix Charles Oberling in Oncology. He is also
Chevalier de la Légion d’Honneur and Officier de l'Ordre National du Mérite.
Tracy Rossin, Member of the Executive Committee, Vice President, Global Head of Communications,
joined us in September 2019. Prior to this, she served as Head of Corporate Affairs at MedImmune from
November 2015 to September 2019 and as Director, External Communications from July 2012 to October
2015. From 2006 to 2012, Ms. Rossin held several global and US brand communications roles at
AstraZeneca. Ms. Rossin received a Bachelor of Arts degree in Communications and Political Science
from Miami University.
Odile Laurent, Member of the Executive Committee, Vice President, Human Resources Director, joined
us in that role in September 2017. Odile Laurent has been appointed Vice President, Human Resources
Director in January 2020. Before joining Innate Pharma, Ms. Laurent was Group Human Resources
Director at Marie Brizard Wine&Spirits Group from 2015 to 2017. Previously, Ms. Laurent was Director
of Human Resources for the ‘Power Transformers’ business unit at Areva T&D, and was subsequently
appointed Head of Global Sales at Alstom Grid. Ms. Laurent has spent most of her career at Sanofi-
Aventis where from 2005 she was successively in charge of the Multi-site and European Human
Resources Department of the ‘Matures Products and OTC’ business unit, and later of the Supply-Chain
business unit worldwide. Ms. Laurent holds a PhD in Physical Sciences from the Institut National
Polytechnique of Toulouse and a Master of Business Administration in Human Resources from the
Institut d’Administration des Entreprises of Toulouse (France).
165
Family Relationships
There are no family relationships among any of the members of our Executive Board and Supervisory
Board.
B. Compensation.
Compensation of Members of the Executive and Supervisory Boards
Following the entry into force of the Sapin 2 Law (French law no. 2016-1691 of December 9, 2016), the
Ordonnance no. 2019-1234 dated November 27, 2019 and the Decree no. 2019-1235 dated November 27,
2019, the payment of any variable or exceptional compensation attributed for a financial year to the
Chairman of the Supervisory Board, the Chairman of the Executive Board and members of the Executive
Board, is subject to approval at the next ordinary general meeting (ex-post vote). The payments of the
below variable compensations, for the year ended December 31, 2020, will be submitted for approval to
the ordinary and extraordinary shareholder meeting to be held on May 28, 2021. In addition to the ex-post
vote described above, French law also requires that the compensation policy for the members of the
Executive and Supervisory Board for the year ending December 31, 2020 is subject to the approval at the
ordinary general meeting relating to the year ending December 31, 2020.
Compensation of Members of the Supervisory Board
Attendance Fees
We pay attendance fees to the members of the Supervisory Board, except for the permanent
representatives of Novo Nordisk A/S and Bpifrance Participations and the Chairman of the Supervisory
Board. At our general meeting of shareholders held on May 19, 2020, shareholders set the total
attendance fees to be distributed among the members of the Supervisory Board at €260,000. The
attendance fees consist of a fixed portion and a variable portion based on attendance at meetings of the
Supervisory Board and its committees. The following table shows the framework for our attendance fees
for the year ended December 31, 2020:
Member Role
Attendance Fee
Fixed Portion (annual fee)
Supervisory Board Member
Audit Committee Chairman
€15,000
€20,000.00
Variable Portion (attendance fee at each
meeting of the Supervisory Board)
Supervisory Board/Committee Chairman
(Audit and Compensation and nomination)
€3,500
Other Members of the Supervisory Board
€2,000
Variable Portion (attendance fee at each
Committee member
€1,300
meeting of a committee of the Supervisory
Board)
Audit Committee Chairman
Compensation and Nomination Committee
Chairman
€5,000
€2,000.00
166
The following table sets forth information regarding the attendance fees earned by members of the
Supervisory Board during the year ended December 31, 2020:
Member
Gilles Brisson
Irina Staatz-Granzer
Patrick Langlois
Véronique Chabernaud
Jean-Yves Blay
Pascale Boissel
Attendance Fees
€
€
€
€
€
€
23,000
27,550
67,700
40,500
23,000
19,838
The Supervisory Board of January 29, 2021 decided to put to the vote of our shareholders at the general
meeting of shareholders to be held on May 28, 2021, a total attendance fees envelop to be distributed
among the members of the Supervisory Board amounting to €260,000 for the year ending December 31,
2021. The following table shows the framework for our attendance fees for the year ended December 31,
2021:
Fixed Portion (annual fee)
Variable Portion (attendance fee at each meeting of the
Supervisory Board)
Variable Portion (attendance fee at each meeting of a committee
of the Supervisory Board)
Member Role
Attendance Fee
Supervisory Board Member
Audit Committe Chairman
and Compensation and
Nomination Committee
Chairman
Supervisory Board
Chairman and Audit
Committe Chairman and
Compensation and
Nomination Committee
Chairman
Other Members of the
Supervisory Board
Audit Committe Chairman
and Compensation and
Nomination Committee
Chairman
€
€
15,000
15,000
€
3,500
€
€
2,000
2,000
Committee member
€
1,300
Chairman Compensation
On December 14, 2016, the Supervisory Board decided that Hervé Brailly, the Chairman of the
Supervisory Board, would receive specific compensation pursuant to article L.225-84 of the French
Commercial Code for his duties as Chairman of the Supervisory Board. The Supervisory Board of
January 31, 2019 decided to increase the fixed compensation of Mr. Brailly by €50,000 to a total of
€100,000. For the year ended December 31, 2020, we paid Mr. Brailly €100,000 in specific compensation
for his performance of these duties.
Agreement with Jean-Yves Blay
On September 14, 2018, we entrusted Jean-Yves Blay, a member of our Supervisory Board, with a
specific mission pursuant to article L.225-84 of the French Commercial Code. Based on Mr. Blay’s
167
scientific and medical qualifications, we have agreed that he will attend meetings of our Strategic
Advisory Board consisting of at least one meeting that he attends in-person and approximately two
conference calls per year. Mr. Blay will participate in these Strategic Advisory Board meetings and then
present a report to the Supervisory Board, at least once a year, on his opinions of the Strategic Advisory
Board’s proceedings. This agreement will remain in place for the duration of Mr. Blay’s term of office as
a member of the Supervisory Board, including any renewal terms. We have agreed to pay Mr. Blay €250
per hour (€10,000 as maximum total amount) in compensation for his performance of these additional
duties. During the year ended Decemner 31, 2020, we paid Mr. Blay €10,000 for his attendance to the
meeting of the Strategic Advisory Board meeting.
Compensation of Members of the Executive Board
Framework for Executive Board Compensation
During the year ended December 31, 2020, the Executive Board consisted of Mondher Mahjoubi, Yannis
Morel and Laure-Hélène Mercier. Dr. Mahjoubi served as Chairman of the Executive Board.
The compensation of members of the Executive Board is decided by the Supervisory Board upon
recommendation by the compensation and nomination committee. The compensation of Dr. Mahjoubi,
the Chairman of the Executive Board, is paid under his social mandate, whereas the compensation of Dr.
Morel and Ms. Mercier is paid under their employment contract.
The compensation of members of the Executive Board includes the following components:
•
•
•
•
Fixed Compensation. The members of the Executive Board receive fixed compensation pursuant to
their employment agreement or, in the case of the Chairman, his social mandate.
Annual Variable Compensation. The members of the Executive Board are eligible to receive annual
variable compensation upon the recommendation of the compensation and nomination committee
based on the achievement of pre-specified objectives. For the year ended December 31, 2020, such
objectives were organized around four pillars: Scientific Excellence, Financial , Commercial
Performance, Business Development and Great Place to Work, each Executive board member
having their own achievement percentage per each pillar and specific objectives based on their core
functions. For the year ended December 31, 2020, the members of the Executive Board were able to
opt to receive a portion equivalent to 50% of their annual variable compensation in the form of free
shares, increased by a 30% premium.
Performance Free Shares. The members of the Executive Board are able to receive, upon
authorization of the Supervisory Board and upon recommendation of the compensation and
nomination committee, equity compensation in the form of performance free shares.
Other Benefits. The members of the Executive Board receive other benefits consisting of a
supplementary pension plan, in-kind benefits and, for the Chairman of the Executive Board,
unemployment insurance.
168
2020 Compensation of Mondher Mahjoubi
The following table sets forth the compensation earned by Dr. Mahjoubi during the year ended December
31, 2020:
Type of Compensation
Fixed Compensation
Annual Variable
Compensation—Cash
Annual Variable
Compensation—Free Shares
Performance Free Shares 2018
Performance Free Shares 2019
Performance Free Shares 2020
Benefits in Kind
Amount of
Compensation
Description
€
€
€
€
€
€
€
470,000 Gross fixed compensation pursuant to Dr.
Mahjoubi’s social mandate.
107,865 This amount represents 50% of Dr. Mahjoubi’s
annual variable compensation, based on his
achievement of 76.5% of the annual objectives.
Dr. Mahjoubi elected to receive the other 50% of
his variable compensation in the form of free
shares.
75,852.42 Dr. Mahjoubi opted for the payment of 50% of
his annual variable compensation in free shares,
increased by a 30% premium. The Executive
Board of July 13, 2020 attributed 28,640 free
shares (AGA Bonus 2020) to Dr. Mahjoubi. The
number of free shares was calculated on the basis
of the weighted-average price per ordinary share
for the 20 trading days preceding the
shareholders meeting of May 19, 2020,
amounting to €6.4 per share. On the basis of the
achievement of 76.50% of its objectives, he
benefits from 21,910 AGA Bonus (among the
28,640 attributed to him. These 21,910 free
shares are valued at €75,852.42 on the basis of
the stock price on December 31, 2020, or
€3.46per ordinary share.
66,500 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Dr. Mahjoubi
of 70,000.00 performance free shares 2018.
142,000 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Dr. Mahjoubi
of 100,000.00 performance free shares 2019.
504,000 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Dr. Mahjoubi
of 300,000 performance free shares 2020.
7,961 Primarily represents amounts paid for use of a
company car and additional retirement benefits
(known as “article 83”), among other benefits.
Total Compensation
€
1,374,178
169
2020 Compensation of Yannis Morel
The following table sets forth the compensation earned by Dr. Morel during the year ended December 31,
2020:
Type of Compensation
Fixed Compensation
Annual Variable
Compensation—Cash
Annual Variable
Compensation—Free Shares
Performance Free Shares 2018
Performance Free Shares 2019
Performance Free Shares 2020
Benefits in Kind
Amount of
Compensation
Description
€
€
240,000 Gross fixed compensation pursuant to Dr.
Morel’s employment contract.
35,856 This amount represents 50% of Dr. Morel’s
annual variable compensation, based on his
achievement of 74.70% of the annual objectives .
Dr. Morel elected to receive the other 50% of his
variable compensation in the form of free shares.
€
25,214 Dr. Morel opted for the payment of 50% of his
annual variable compensation in free shares,
increased by a 30% premium. The Executive
Board of July 13, 2020 attributed 9,750 free
shares (AGA Bonus 2019) to Dr. Morel. The
number of free shares was calculated on the basis
of the weighted-average price per ordinary share
for the 20 trading days preceding May 19, 2020
shareholders meeting, amounting to €6.4 per
share. On the basis of the achievement of 74.70%
of its objectives, Dr. Morel benefits from 7,283
(among the 9,750 attributed to him). These 7,283
€
€
€
€
47,500 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Dr. Morel of
50,000 performance free shares 2018.
71,000 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Dr. Morel of
50,000 performance free shares 2019.
168,000 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Dr. Morel of
100,000 performance free shares 2020.
4,233 Primarily represents amounts paid for use of a
company car and additional retirement benefits
(known as “article 83”), among other benefits.
Total Compensation
€
591,803
170
2020 Compensation of Laure-Hélène Mercier
The following table sets forth the compensation earned by Ms. Mercier during the year ended December
31, 2020:
Type of Compensation
Fixed Compensation
Annual Variable
Compensation—Cash
Annual Variable
Compensation—Free Shares
Performance Free Shares 2018
Performance Free Shares 2019
Performance Free Shares 2020
Benefits in Kind
Total Compensation
Amount of
Compensation
Description
€
€
€
€
€
€
€
€
200,000 Gross fixed compensation pursuant to Ms.
Mercier’s employment contract.
31,360.0 This amount represents 50% of Ms. Mercier’s
annual variable compensation, based on her
achievement of 78.40% of the annual objectives.
Ms. Mercier’s elected to receive the other 50% of
her variable compensation in the form of free
shares.
22,052.94 Ms. Mercier’s opted for the payment of 50% of
her annual variable compensation in free shares,
increased by a 30% premium. The Executive
Board of July 13, 2020 attributed 8,125 free
shares (AGA Bonus 2020) to Ms. Mercier. The
number of free shares was calculated on the basis
of the weighted-average price per ordinary share
for the 20 trading days preceding May 19, 2020
shareholders meeting, amounting to €6.4 per
share. On the basis of achievement of 78.40% of
Ms. Mercier's objectives, she benefits from 6,370
AGA Bonus (among the 8,125 attributed to her).
28,500 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Ms. Mercier
of 30,000.00 performance free shares 2018.
71,000 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Ms. Mercier
of 50,000 performance free shares 2018.
168,000 This amount was calculated in accordance with
the IFRS 2 valuation of the grant to Ms. Mercier
of 100,000 performance free shares 2020.
2,246 Primarily represents amounts paid for additional
retirement benefits (known as “article 83”).
523,159
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2021 Executive Board Compensation
At our general meeting of shareholders to be held on May 28, 2021 the compensation of the members of
the Executive Board set forth in the following table for the year ended December 31, 2021 will be put to
the vote of our shareholders:
Type of Compensation
Fixed Compensation
Maximum Annual Variable Compensation if 100% of the
objectives are reached
Maximum Annual Variable Compensation if case of over-
performance
€
€
€
Mondher
Mahjoubi
470,000 €
Yannis Morel
240,000
282,000 €
96,000
535,800 €
153,600
The variable compensation for the year ended December 31, 2021 is based on the achievement of certain
pre-specified objectives split into operational targets. Certain of the objectives are general (science,
business development, finance, and great human resources) and the other objectives are specific and relate
to the core functions of the member of the Executive Board. Each class of objectives was divided into
three operational targets: (i) the base target, which, if attained, will result in a payment equal to 100%, (ii)
the mid-surperformance target, which, if attained, will result in a payment equal to 125% and (iii) the
high-surperformance target, which, if attained, will result in a payment equal to 150%. The variable
compensation of Mr. Mahjoubi is solely based on the achievement of the general objectives. 60% of the
variable compensation of Mr. Morel is based on the achievement of the general objectives and 40% of
their variable compensation is based on the achievement of the specific objectives relating to their
respective core functions. Members of the Executive Board may opt for the payment of 50% of their
annual variable compensation in free shares, in which case it will be increased by a 50% premium.
At our general meeting of shareholders to be held on or about May 28 2021, the allocation of free
performance shares subject to stock market value and internal conditions will be put to the vote of our
shareholders.
Limitations on Liability and Indemnification Matters
Under French law, provisions of bylaws that limit the liability of the members of Executive and
Supervisory Boards are prohibited. However, French law allows sociétés anonymes to contract for and
maintain liability insurance against civil liabilities incurred by members of Executive and Supervisory
Boards involved in a third-party action, provided that they acted in good faith and within their capacities
as members of such board of the company. Criminal liability cannot be indemnified under French law,
whether directly by the company or through liability insurance.
We have liability insurance for our Executive and Supervisory Board members, and insurance coverage
for liability under the Securities Act. We also entered into agreements with our Executive and
Supervisory Board members to provide contractual indemnification. With certain exceptions and subject
to limitations on indemnification under French law, these agreements provide for indemnification for
damages and expenses including, among other things, attorneys’ fees, judgments, fines and settlement
amounts incurred by any of these individuals in any action or proceeding arising out of his or her actions
in that capacity. We believe that this insurance and these agreements are necessary to attract qualified
Executive and Supervisory Board members.
These agreements may discourage shareholders from bringing a lawsuit against our Executive and
Supervisory Board members for breach of their fiduciary duty. These provisions also may have the effect
172
of reducing the likelihood of derivative litigation against our Executive and Supervisory Board members,
even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a
shareholder’s investment may be adversely affected to the extent we pay the costs of settlement and
damage awards against our Executive and Supervisory Board members pursuant to these insurance
agreements.
Equity Incentives
We believe our ability to grant equity incentives is a valuable and necessary compensation tool that
allows us to attract and retain the best personnel for positions of substantial responsibility, provides
additional incentives to employees and promotes the success of our business. Due to French corporate law
and tax considerations, we have historically granted several different equity incentive instruments to our
Executive Board and Supervisory Board members, employees and consultants, including (i) BSAs, which
have historically only been granted to independent members of the Supervisory Board and consultants,
(ii) BSAARs and (iii) free shares.
Our Executive Board’s authority to grant these warrants and free shares and the aggregate amount
authorized to be granted must be approved by two-thirds of the shareholders present at the relevant
extraordinary shareholders’ meeting. Once approved by our shareholders, our Executive Board can
continue to grant such awards for a specified period upon prior authorization of the Supervisory Board.
We have various compensation plans for our Executive Board members, Supervisory Board members,
employees and consultants that have been approved by our shareholders. The last allocation in 2016 of
BSAARs no longer continue to vest following termination of the employment, office or service of the
holder within the first two years and all vested warrants must be exercised within post-termination
exercise periods set forth in the grant documents. In the event of certain changes in our share capital
structure, such as a consolidation or share split or dividend, French law and applicable grant
documentation provides for appropriate adjustments of the numbers of ordinary shares issuable and/or the
exercise price of the outstanding warrants.
As of December 31, 2020, we had the following equity awards, warrants and free shares outstanding:
•
•
•
•
•
•
•
284,500 ordinary shares issuable upon the exercise of share warrants (BSA) outstanding as of
December 31, 2020 at a weighted average exercise price of €7,42 per ordinary share;
1,360,822 ordinary shares issuable upon the exercise of redeemable share warrants (BSAAR)
outstanding as of December 31, 2020 at a weighted average exercise price of €6.00 per ordinary
share;
649,200 ordinary shares issuable upon conversion of 6,492 free preferred shares (AGAP 2017)
outstanding as of December 31, 2020 assuming all related performance and presence conditions are
met;
104,861 ordinary shares issuable upon the vesting of free shares (AGA) outstanding as of
December 31, 2020;
805,550 ordinary shares issuable upon conversion of 6,635 free preferred shares (AGAP 2016) as of
December 31, 2020, assuming all performance and presence conditions are met;
442,500 ordinary shares issuable upon definitive acquisition of 442,500Free Performance shares
2018 as of December 31, 2020, assuming all performance and presence conditions are met;
785,600 ordinary shares issuable upon definitive acquisition of 785,600 Free Performance shares
2020 as of December 31, 2020, assuming all performance and presence conditions are met;
173
•
•
1,406,110 ordinary shares issuable upon definitive acquisition of 1,406,110 Free Performance
shares 2020 as of December 31, 2020, assuming all performance and presence conditions are met;
and
30,000 ordinary shares issuable upon exercise of 30,000 stock options 2020 as of December 31,
2020, assuming vesting conditions are met.
Equity Warrants and Redeemable Share Subscription Warrants
Share Warrants (BSA)
Share warrants, or BSA, are granted at a de minimis price and entitle the holder of one BSA to exercise
the warrant for one underlying share, at an exercise price per share determined by our Executive Board at
the time of grant by reference to the then prevailing share price. We have granted BSA to Supervisory
Board members and certain consultants of the Company. Our share warrants plans include provisions that
allow for the adjustment of the one-for-one exercise ratio to compensate for certain modifications of our
share capital, such as rights issues, stock splits, mergers and other events affecting all existing
shareholders. None of those events have occurred yet. Our BSA have an exercise period of 10 years –
BSA not exercised after that time lapse and are automatically cancelled. Our share warrants cannot be
sold.
The following table shows the BSA outstanding as of December 31, 2020:
Plan title
General assembly
meeting date
BSA 2011
June 29,
2011
BSA 2013
June 28,
2013
BSA 2014
May 27,
2014
Date of grant
July 29, 2011
July 17, 2013
July 16, 2014
BSA 2015-1
April 27,
2015
April 27,
2015
BSA 2015-2
April 27,
2015
July 1, 2015
BSA 2017
June 2, 2016
September
20, 2017
Total number of
BSA authorized
Total number of
BSA granted
Start date of the
exercise period
End date of the
exercise period
Exercise price per
BSA/share
Number of BSA
exercised as of
December 31,
2020
BSA cancelled or
lapsed as of June
30, 2020
BSA remaining as of
December 31, 2020
350,000
300,000
150,000
150,000
150,000
150,000
225,000
237,500
150,000
70,000
14,200
37,000
July 29, 2011
July 17, 2013
July 16, 2014
July 29, 2021
July 17, 2023
July 16, 2024
April 27,
2015
April 26,
2025
July 1, 2015
June 30,
2025
September
20, 2017
September
20, 2027
€1.77
€2.36
€8.65
€9.59
€14.05
€11
183,060
191,140
75,000
—
—
—
—
—
—
—
—
—
41,940
46,360
75,000
70,000
14,200
37,000
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Redeemable Share Warrants (BSAAR)
Redeemable share warrants, or BSAAR, are identical to our share warrants of BSA (including the one-
for-one exercise ratio, its potential adjustment for certain modifications of our share capital and the
exercise period of 10 years), except for the following features:
•
•
the BSAAR are initially purchased by the beneficiary at their fair value, as determined by an expert,
and
the BSAAR plans include a “forcing” clause making it possible to encourage holders to exercise
their BSAAR when the market price exceeds the exercise price and reaches a threshold defined in
the BSAAR plan. We can then, subject to a time period for notifying the holders that will permit
them to exercise their BSAAR, decide to purchase the unexercised BSAAR at a unit price equal to
the BSAAR acquisition price initially paid by its holder.
Our redeemable share warrants cannot be sold. Our BSAAR have been granted to certain of our executive
officers and employees.
The following table shows the BSAAR outstanding as of December 31, 2020:
Plan title
General assembly meeting date
Date of grant
BSAAR 2011
June 29, 2011
BSAAR 2012
BSAAR 2015
June 28, 2012 April 27, 2015
September 9,
2011
May 27, 2013
July 1, 2015
Total number of BSAAR granted
650,000
146,050
1,050,382
Start date of the exercise period
End date of the exercise period
BSAAR initial purchase price
Exercise price per BSAAR/share
September 9,
2011
September 9,
2021
May 27, 2013
July 1, 2015
May 27, 2023
June 30, 2025
€0.05
€2.04
€0.11
€2.04
€1.15
€7.20
1,940
2,720
Number of BSAAR exercised as of December 31, 2020
395,000
85,950
BSAAR cancelled or lapsed as of December 31, 2020
—
—
BSAAR remaining as of December 31, 2020
255,000
60,100
1,045,722
Free Shares (AGA)
Free shares, or AGA, are employee equity incentive instruments pursuant to which the beneficiaries are
granted, for free, the possibility to receive our ordinary shares under certain conditions. Upon grant by our
Executive Board, the AGA are subject to an acquisition, or vesting, period of at least one year. At the end
of this period, the free shares vest and the beneficiary becomes a full shareholder. However, if the vesting
period is less than a certain period set by law of currently two years (but three years under previous law),
175
it must be followed by a lock-up period, so that the sum of the two periods is equal to a minimum total
period also set by law of currently two years (but three years under previous law). Vesting can be
conditional or not. The vesting of all or our AGA is subject to a presence condition at the end of the
vesting period. Some of our AGA are also subject to performance conditions. Over the years, we have
established several AGA plans, for our employees or for management only, sometimes as a “welcome
package” (with no performance conditions). Our free share plans include provisions that allow for the
adjustment of the number of ordinary shares to which a beneficiary is entitled at the end of the vesting
period to compensate for certain modifications of our share capital, such as rights issues, stock splits,
mergers and other events affecting all existing shareholders, during the vesting period. Certain of our
plans also provide for an accelerated vesting in case of a tender offer on the Company during the vesting
period.
One particular AGA plan, the “AGA Bonus,” entitles our management to opt for the payment of up to
50% of their annual variable compensation in free shares. Those who take this option benefit from a
matching compensation equal to 30% for 2020 of the corresponding portion of the annual variable
compensation, also payable in free shares. The AGA Bonus are subject to the same performance
conditions, after a one-year vesting period, as the annual variable compensation. The number of AGA
Bonus is determined by dividing the euro amount of the annual variable compensation for which the
election is made and of the matching contribution, by an average of the trading price of our shares. Once
vested, the AGA Bonus are subject to the minimum one-year lock-up period.
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The following table shows the AGAs outstanding as of December 31, 2020:
AGA New
Members
2017-1
June 23,
2017
AGA Perf
Employees
2018
May 29,
2018
AGA Perf
Manageme
nt 2018
May 29,
2018
AGA Perf
Employees
2019
May 22,
2019
AGA Perf
Managemen
t 2019
May 22,
2019
AGA Perf
Employees
2020
May 19,
2020
AGA Perf
Managemen
t 2020
May 19,
2020
AGA Bonus
Managemen
t 2020
May 19,
2020
April 29,
2019
3 years
None
None
November
20,
2018
November
20,
2018
November
4,
2019
November 4,
2019
August 5,
2020
August 5,
2020
July 13,
2020
3 years
None
Yes
3 years
None
Yes
3 years
None
Yes
3 years
None
Yes
3 years
None
Yes
3 years
None
Yes
1 or 2y
1 or none
Yes
Plan title
General
assembly
meeting date
Date of grant
Vesting Period
Lock-up period
Performance
Conditions
Number of
25,000
327,500
260,000
546,700
355,000
769,202
710,000
79,861
AGA granted
Number of
—
—
—
—
—
—
—
—
AGA vested
as of
December 31,
2020
Number of
AGA lapsed
as of
December 31,
2020 (2)
Number of
AGA
remaining to
be vested as
of December
31, 2020
—
85,000
60,000
86,100
30,000
70,540
—
—
25,000
242,500
200,000
460,600
325,000
696,110
710,000
79,861
(1) The annual variable compensation performance conditions are determined on or about the beginning of the fiscal year and executives
make their election at about that time. However, because we need the shareholders’ vote on the total number of free shares available for
granting AGA Bonus (like all other free shares), we wait until our annual shareholders meeting (generally during the second half of the
second quarter of the year) to grant the AGA Bonus – hence a granting, vesting and lock-up calendar different from that of the payment of
the annual variable compensation, which takes place towards the end of the fiscal year or at the beginning of the next fiscal year.
(2) Usually after the end of the vesting period, the Executive Board will convene and acknowledge the number of free shares that have vested
and the number of those that have not because the presence condition and, as applicable, the performance conditions, have not been met.
For the purpose of computing the amount of share-based compensation in our consolidated financial statements, AGA that have lapsed
because the presence condition has not been met, are excluded from the computation, even though the Executive Board has not met yet
and formally acknowledged this fact. As a result, certain of the numbers above are different from those in our consolidated financial
statements.
The following authorization will be submitted for approval to the general meeting of the shareholders to
be held on May 28, 2021: (i) up to 200,000 free shares to the benefit of employed members of the
Executive Committee, employed senior executives and/or corporate officers (AGA Bonus), (ii) up to
700,000 free shares with performance conditions to the benefit of executive officers, employed members
of the Executive Committee, employed senior executives and/or corporate officers (iii) up to 1,400,000
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free shares with performance conditions to the benefit of employees and (iv) up to 30,000 stock-options to
the benefit of employees of Innate Pharma Inc.
Free Preferred Shares (AGAP)
Free preferred shares, or AGAP, are another employee equity incentive instrument similar to the free
shares or AGA, except that, after a one-year vesting period, the beneficiaries receive a preferred shares
(shares B) which will become convertible into ordinary shares following a lock-up period of two
additional years, if the performance conditions (and a presence condition) are met at the end of this lock-
up period. Each free preferred share is convertible into a number of our ordinary shares – which number
depends upon the degree of fulfilment of the performance conditions. The free preferred shares remain
convertible into ordinary shares for a period of six years and six months. Free preferred shares not
converted at the end of this conversion period can be repurchased by us and cancelled. Our AGAP cannot
be sold.
We have established several AGAP plans in 2017 and 2018 for all of our employees or for management
only.
During the acquisition and lock-up periods, beneficiaries of the 2017 AGAP are not entitled to vote at our
shareholders’ meetings, to dividends or to preferential subscription rights. On the contrary, during the
lock-up period, beneficiaries of the 2018 AGAP are entitled to vote at our shareholders’ meetings, to
dividends and to preferential subscription rights, as if they held the same number of ordinary shares as
their number of vested AGAP. After the end of the lock-up period, holders of all of our AGAP that have
not yet converted them into our ordinary shares, are entitled to vote at our shareholders’ meetings, to
dividends and to preferential subscription rights, on the basis of the number of ordinary shares to which
they are entitled if they convert their AGAP.
Our free preferred share plans include provisions that allow for the adjustment of the number of ordinary
shares to which a beneficiary is entitled upon conversion of his or her AGAP at the end of the lock-up
period, to compensate for certain modifications of our share capital, such as rights issues, stock splits,
mergers and other events affecting all existing shareholders. The 2018 AGAP plan provides for an
accelerated vesting with a waiver of the performance conditions in case of a tender offer on the Company
during the vesting period.
On October 21, 2019, the performance criteria of the 2016-1 AGAP were assessed and the conversion
ratio was determined as follows: one 2016-1 AGAP gives the right to 130 ordinary shares.
On December 30, 2019, the performance criteria of the 2016-2 AGAP were assessed and the conversion
ratio was determined as follows: one 2016-2 AGAP gives the right to 111 ordinary shares.
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The following table shows the AGAPs outstanding as of December 31, 2020:
Plan title
General assembly meeting date
Date of grant
Number of AGAP granted
Maximum number of ordinary shares
into which each AGAP can be
converted
AGAP
Management
2016-1
June 2, 2016
AGAP
Management
2016-2
June 2, 2016
AGAP
Employees
2016-1
June 2, 2016
October 21,
2016
2,000
130
December
30, 2016
3,000
111
October 21,
2016
2,486
130
Number of AGAP lapsed during the
450
—
vesting period
Number of AGAP vested
Number of AGAP lapsed during the
lock up period
Number of outstanding AGAP
1,550
100
1,450
3,000
—
3,000
105
2,381
146
2,185
Stock-Options
AGAP
Management
2017-1
June 23,
2017
AGAP
Employees
2017-1
June 23,
2017
April 3, 2018 April 3, 2018
2,400
100
400
2,000
400
1,600
5,725
100
144
5,581
689
4,892
We also grant stock-options to certain of our employees as part of their compensation. In 2020, we have
adopted a stock-option plan pursuant to which we issued stock-options to certain employees of our U.S.
affiliate. The stock-options consists of options to subscribe for ordinary shares of the Company, which
vest over a three-year period in equal proportions subject to certain presence conditions. Each stock-
option gives the holder the right to subscription for one ordinary share of the Company. The exercise
price of the stock-options is set at the fair market value of the ordinary shares of the Company. The stock-
option plan and the stock-options granted under the plan are governed by French laws.
The following table shows stock-options outstanding as of December 31, 2020:
Plan title
General assembly meeting date
Date of grant
Number of Stock-Options granted
Maximum number of ordinary shares
into which each Stock-Option can
be converted
Stock-
Options 2020
19/05/20
21/07/20
102,000
102,000
Number of Stock-Options lapsed
72,000
during the vesting period
Number of Stock-Options vested
Number of Stock-OptionsStock
exercised
—
—
Number of outstanding Stock-
30,000
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C. Board Practices
Supervisory Board
The Supervisory Board is made up of a minimum of three members and a maximum of eighteen. The
members of the Supervisory Board are appointed for a renewable term of two years at the general meeting
of shareholders. The general meeting of shareholders may revoke the appointments of the members of the
Supervisory Board at any time during the meeting by a simple majority vote. The appointees are selected
by the shareholders and may be individuals or companies. Each member must own at least one of our
ordinary shares for the entire term of the appointment.
The age limit for being a member of the Supervisory Board and the limitations on holding such an
appointment concurrently with an appointment in another company are subject to the applicable legal and
regulatory provisions.
Role of the Supervisory Board in Risk Oversight
Our Supervisory Board is primarily responsible for the oversight of our risk management activities and
has delegated to the audit committee the responsibility to assist our Supervisory Board in this task. While
our Supervisory Board oversees our risk management, our management, through the Executive Board is
responsible for day-to-day risk management processes. Our Supervisory Board expects our management
to consider risk and risk management in each business decision, to proactively develop and monitor risk
management strategies and processes for day-to-day activities and to effectively implement risk
management strategies adopted by the Supervisory Board. We believe this division of responsibilities is
the most effective approach for addressing the risks we face.
Supervisory Board Committees
The Supervisory Board has established an audit committee, a compensation and nomination committee
and a transactions committee, which operate pursuant to rules of procedure adopted by our Supervisory
Board.
Subject to available exemptions, the composition and functioning of all of our committees will comply
with all applicable requirements of the French Commercial Code, the Exchange Act, the Nasdaq listing
rules and SEC rules and regulations.
In accordance with French law, committees of our Supervisory Board only have an advisory role and can
only make recommendations to our Supervisory Board. As a result, decisions are made by our
Supervisory Board taking into account non-binding recommendations of the relevant Supervisory Board
committee.
Audit Committee
Our audit committee assists our Supervisory Board in its oversight of our corporate accounting and
financial reporting and oversees the selection of our auditors, their remuneration and independence and
keeps the Supervisory Board informed on control systems, key processes and procedures, security and
risks. From September 2020, the members of the audit committee as of the date of this Annual Report are
Patrick Langlois, Irina Staatz-Granzer and Ms. Pascale Boissel. Dr. Langlois is the Chairman of the audit
committee.
Our Supervisory Board has determined that Dr. Langlois, Dr. Staatz-Granzer and Ms. Pascale Boissel are
independent within the meaning of the applicable listing rules and the independence requirements
contemplated by Rule 10A-3 under the Exchange Act. Our Supervisory Board has further determined that
180
Dr. Langlois is an “audit committee financial expert” as defined by the Nasdaq listing rules and that each
of the members qualifies as financially sophisticated under the Nasdaq listing rules.
The principal responsibility of our audit committee is to monitor the existence and efficacy of our
financial audit and risk control procedures on an ongoing basis.
Our Supervisory Board has specifically assigned the following duties to the audit committee:
•
•
•
•
•
legal control of the half-year and annual accounts;
evaluating internal control practices, risk analysis;
supervising the creation of the financial statements published by us;
assessing accounting methods; and
selecting statutory auditors, negotiating their fees, reviewing of their conclusions and reviewing
their independence.
The audit committee reviews and approves the report from the Chairman of the Supervisory Board on
internal control.
Compensation and Nomination Committee
Our compensation and nomination committee assists our Supervisory Board in reviewing and making
recommendations to our Supervisory Board with respect to the appointment and the compensation of the
members of our Executive Board, Supervisory Board and Executive Committee and other key employees.
In accordance with operating rules adopted by the Supervisory Board, the nomination and compensation
committee is composed of at least two members appointed by the Supervisory Board. Following the
Supervisory Board on December 16, 2020, the members of the committee are Patrick Langlois, Hervé
Brailly, Véronique Chabernaud and Dr. Jean-Yves Blay. Currently, Dr. Langlois, Dr. Chabernaud and Dr.
Jean-Yves Blay are independent members of the compensation and nomination committee. Dr.
Chabernaud is the Chairman of the committee.
Our Supervisory Board has specifically assigned the following duties to the compensation and nomination
committee: reviewing our remuneration policy, in particular the description of our collective objectives
(applicable company-wide) and individual objectives (for members of the Executive Board and the
Executive Committee), reviewing the compensation of the members of our Executive Board and the
Executive Committee, the policy concerning the distribution of equity such as warrants, stock options,
grants and capital increases reserved for members of our savings plan, examining the amount of
attendance fees among the Supervisory Board and the committees members, assisting the Supervisory
Board in the selection of the members of the Executive Board and committees, making recommendations
with respect to the independence of the members of the Supervisory Board and committees and
preventing conflicts of interest within the Supervisory Board.
Transactions Committee
Our transactions committee assists our Supervisory Board in examining the business and corporate
development opportunities available to us, which may include the acquisition of rights to products or the
acquisition of other companies as well as out-licensing opportunities. The members of this committee are
Irina Staatz-Granzer, Hervé Brailly, Gilles Brisson and Marcus Schindler. Currently, Dr. Staatz-Granzer
is an independent member and Chairman of the transactions committee. Our Supervisory Board has
specifically assigned the following duties to the transactions committee: to analyze the fundamentals of
181
the products and/or companies targeted by us, the feasibility of targeted acquisitions and to participate in
the selection of investment bankers and/or consultants.
Observer to the Supervisory Board
Dr. Olivier Martinez is an observer to the Supervisory Board. Dr. Martinez is a Senior Investments
Director for Bpifrance Participations.
Other Committees
The Strategic Advisory Board
We also have a Strategic Advisory Board composed of six external consultants, consisting of three
individuals from the medical community and three individuals from the scientific community. The
Strategic Advisory Board is not a committee of the Supervisory Board within the meaning of Article
R.225-29 of the French Commercial Code; its members are chosen by the Executive Board. This kind of
advisory committee is common in French companies in the biotechnology sector.
The Strategic Advisory Board’s role is to assist us in our strategic choices in scientific and technical
fields. Its main missions are to evaluate the relevance of our choices in terms of product development and
to propose, if necessary, changes to strategic or technical approaches; to advise management and guide
our scientific direction in identifying strategies and selecting product candidates, based, in particular, on
the scientific results obtained by us, including new targets and new compounds and to promote and advise
us in our alliance strategies, such as external growth supporting synergies, including acquisition of new
competences, purchase of operating rights, product candidates and innovative technologies. The Strategic
Advisory Board is comprised of Sebastian Amigorena, Aurélien Marabelle, Ruslan Medzhitov, Miriam
Merad, Tanguy Seiwert and Mario Sznol. Dr. Merad is the Chairman of the Strategic Advisory Board.
Sebastian Amigorena, Ph.D., is the “Directeur de Recherche de Classe Exceptionnelle” at the Centre
National de la Recherche Scientifique. He also leads the Immunology Department and the newly created
Cancer Immunotherapy Center at Institut Curie in Paris (France). Dr. Amigorena has made significant
contributions to immunology and cell biology at every stage of his career. His findings have helped
advance the understanding of antigen presentation and T cell priming by dendritic cells, with applications
in the fields of cancer immunotherapy and vaccination. Dr. Amigorena has received numerous national
and international prizes and awards, including the prestigious senior European Research Council award in
2008 and in 2015.
Aurélien Marabelle, MD, Ph.D., is the Clinical Director of the Cancer Immunotherapy Program at
Gustave Roussy Cancer Center in Villejuif, France. Dr. Marabelle’s clinical practice is dedicated to early
phase clinical trials in cancer immunotherapy and his translational research is focused on mechanisms of
action of immune checkpoint monoclonal antibodies. He works as a senior medical oncologist and an
investigator in the Drug Development Department. He is coordinating a team focused on cancer
immunotherapy translational research projects at INSERM.
Ruslan Medzhitov, Ph.D., is a Sterling Professor at Yale University School of Medicine in New Haven,
Connecticut and an Investigator of the Howard Hughes Medical Institute. His research interests include
biology of inflammation, biological bases of diseases and evolutionary design of biological systems. Dr.
Medzhitov is a member of the National Academy of Sciences, National Academy of Medicine and
European Molecular Biology Organization. He is a fellow of the American Academy of Microbiology
and a foreign member of the Russian Academy of Sciences.
Miriam Merad, M.D., Ph.D., is the Mount Sinai Chair professor in Cancer Immunology and the Director
of the Precision Immunology Institute at Mount Sinai School of Medicine in New York. Dr. Merad’s
182
laboratory studies the contribution of macrophages and dendritic cells to Cancer and Inflammatory
diseases in mice and humans. She has shown that tissue macrophages have unique functional attributes
that contribute to tumor outcome and response to treatment. Dr. Merad pioneered mapping the regulatory
network of dendritic cells resulting in the identification of a lineage of dendritic cells, the CD103+ DC,
that is now considered to be a key target to improve antiviral and antitumor immunity. Dr. Merad receives
generous funding from the National Institutes of Health, or NIH, for her research on innate immunity and
their contribution to human disease and belongs to several NIH consortia.
Tanguy Seiwert, M.D., is Assistant Professor of Medicine, Section of Hematology and Oncology in the
Department of Medicine at the University of Chicago. Dr. Seiwert’s research focuses on the biology of
head and neck cancer and lung cancer. In the laboratory, he studies targeted therapies that disrupt specific
pathways vital to cancer growth and metastasis. More specifically, he focuses on which novel drugs
appear most promising, which individual tumors are more likely to respond to these treatments and how
to successfully combine therapies. Dr. Seiwert uses this preclinical knowledge to develop new treatments
for use in clinical trials, and to ultimately improve patient care.
Mario Sznol, M.D., is a Professor of Medicine, Leader, Melanoma/RCC Disease-Associated Research
Team, and co-leader, Cancer Immunology Program at the Yale Cancer Center in New Haven,
Connecticut. Recently, he was appointed the incoming President of the Society for Immunotherapy of
Cancer. Dr. Sznol’s interests include cancer immunotherapy, drug development for cancer and treatment
of patients with melanoma and renal cell carcinoma. After completing a fellowship in medical oncology
at Mount Sinai College of Medicine in New York in 1987, he joined the National Cancer Institute, or
NCI, as a Senior Investigator in the Investigational Drug Branch, or IDB, Cancer Therapy Evaluation
Program, or CTEP. He was Head of the Biologics Evaluation Program, IDB, CTEP, from 1994 to 1999,
and in 1999, was appointed Vice President of Clinical Development for Vion Pharmaceuticals in New
Haven, Connecticut. He joined the Yale faculty in medical oncology in 2004.
Executive Committee
We also have an Executive Committee composed of members with significant experience in strategy,
financial management, medical research, research and development project management, the negotiation
of industrial and commercial agreements in the field of innovative companies, including biotechnology
companies, compliance and regulations and in business development. The Executive Committee meets at
least once a month and deals with all subject regarding the activities and the management of the company.
The current members of the Executive Committee are Mondher Majoubi, Yannis Morel, Laure-Hélène
Mercier, Joyson Karakunnel, Odile Belzunce, Jennifer Butler, Frédérique Brune, Tracy Rossin and Odile
Laurent. Eric Vivier, our Senior Vice President, Chief Scientific Officer, is a permanent guest to the
meetings of the Executive Committee.
Corporate Governance Practices
As a French société anonyme, we are subject to various corporate governance requirements under French
law. We are a “foreign private issuer” under the U.S. federal securities laws and the Nasdaq listing rules.
The foreign private issuer exemption permits us to follow home country corporate governance practices
instead of certain Nasdaq listing requirements. A foreign private issuer that elects to follow a home
country practice instead of Nasdaq listing requirements must submit to Nasdaq a written statement from
an independent counsel in such issuer’s home country certifying that the issuer’s practices are not
prohibited by the home country’s laws.
We apply the AFEP/MEDEF code, which recommends that a majority of the members of the Supervisory
Board be independent (as such term is defined under the code). Neither the corporate laws of France nor
183
our bylaws requires that (i) our compensation committee include only independent members of the
Supervisory Board, (ii) each committee of the Supervisory Board have a formal written charter or (iii) our
independent members of the Supervisory Board hold regularly scheduled meetings at which only
independent members of the Supervisory Board are present. We intend to follow French corporate
governance practices in lieu of Nasdaq listing requirements for each of the foregoing.
These exemptions do not modify the independence requirements for the audit committee, and we with the
requirements of the Sarbanes-Oxley Act and the Nasdaq listing rules, which require that our audit
committee be composed of at least three independent members. Rule 10A-3 under the Exchange Act
provides that the audit committee must have direct responsibility for the nomination, compensation and
choice of our auditors, as well as control over the performance of their duties, management of complaints
made, and selection of consultants. Under Rule 10A-3, if the laws of a foreign private issuer’s home
country require that any such matter be approved by the board of directors or the shareholders of the
Company, the audit committee’s responsibilities or powers with respect to such matter may instead be
advisory. Under French law, the audit committee may only have an advisory role and appointment of our
statutory auditors, in particular, must be decided by our shareholders at our annual meeting.
In addition, Nasdaq rules require that a listed company specify that the quorum for any meeting of the
holders of share capital be at least 33 1/3% of the outstanding shares of the company’s ordinary voting
shares. We intend to follow our French home country practice, rather than complying with this Nasdaq
rule. Consistent with French Law, our bylaws provide that when first convened, general meetings of
shareholders may validly convene only if the shareholders present or represented hold at least (1) 20% of
the voting shares in the case of an ordinary general meeting or of an extraordinary general meeting where
shareholders are voting on a capital increase by capitalization of reserves, profits or share premium, or (2)
25% of the voting shares in the case of any other extraordinary general meeting. If such quorum required
by French law is not met, the meeting is adjourned. There is no quorum requirement under French law
when an ordinary general meeting or an extraordinary general meeting is reconvened where shareholders
are voting on a capital increase by capitalization of reserves, profits or share premium, but the reconvened
meeting may consider only questions that were on the agenda of the adjourned meeting. When any other
extraordinary general meeting is reconvened, the required quorum under French law is 20% of the shares
entitled to vote. If a quorum is not met at a reconvened meeting requiring a quorum, then the meeting may
be adjourned for a maximum of two months.
Code of Ethics
We have adopted a Code of Ethics applicable to all of our employees and members of our Executive
Board and Supervisory Board. The Code of Ethics is available on our website. We expect that any
amendments to the Code of Ethics, or any waivers of its requirements, will be disclosed on our website.
Executive Compensation Arrangements
Except the arrangements described in “Item 7.B—Related Party Transactions—Arrangements with the
Members of our Executive and Supervisory Boards,” there are no arrangements or understanding between
us and any of our other members of our Executive and Supervisory Boards providing for benefits upon
termination of their employment, other than as required by applicable law.
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D. Employees
As of December 31, 2020, we had 244 full-time employees. None of our employees are represented by
collective bargaining agreements. We believe that we maintain good relations with our employees. The
following tables show the number of employees as of December 31, 2020 broken out by department :
Full-time equivalent employees of Innate Pharma SA and Innate Pharma Inc.
Research and development
General and administrative
Executive committee
Total
As of December 31,
2020
165
70
9
244
E. Share Ownership.
For information regarding the share ownership of our directors and executive officers, see “Item 6.B—
Compensation” and “Item 7.A—Major Shareholders.”
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Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
The following table and accompanying footnotes sets forth, as of December 31, 2020, information
regarding beneficial ownership of our ordinary shares by:
•
•
•
each person, or group of affiliated persons, known by us to beneficially own more than 5% of our
ordinary shares;
each of our Executive Board and Supervisory Board members individually; and
all of our Executive Board and Supervisory Board members as a group.
Assuming that all of our ordinary shares represented by ADSs are held by residents of the United States,
as of December 31, 2020, we estimate that approximately 3.4 million shares, or 4.3% of our ordinary
shares were held of record by 5 residents of the United States.
Beneficial ownership is determined according to the rules of the SEC and generally means that a person
has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power
of that security, including free shares that vest within 60 days of March 31, 2021 and options and warrants
that are currently exercisable or exercisable within 60 days of March 31, 2021. Ordinary shares subject to
free shares, options and warrants currently exercisable or exercisable within 60 days of March 31, 2020
are deemed to be outstanding for computing the percentage ownership of the person holding these free
shares, options or warrants and the percentage ownership of any group of which the holder is a member,
but are not deemed outstanding for computing the percentage of any other person.
Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the
persons named in the table below have sole voting and investment power with respect to all ordinary
shares shown that they beneficially own, subject to community property laws where applicable. The
information does not necessarily indicate beneficial ownership for any other purpose, including for
purposes of Sections 13(d) and 13(g) of the Securities Act.
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Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Innate
Pharma S.A., 117, Avenue de Luminy – BP 30191, 13009 Marseille, France.
Number of Ordinary
Shares Beneficially Owned
Percentage of Ordinary
Shares Beneficially
Owned
5% Shareholders:
Novo Nordisk A/S(1)
MedImmune Limited(2)
Bpifrance Participations(3)
Executive Board and Supervisory Board members and
other executive officers:
Mondher Mahjoubi, M.D.(4)
Yannis Morel, Ph.D.(5)
Laure-Hélène Mercier(6)
Hervé Brailly, Ph.D.(7)
Irina Staatz-Granzer(8)
Jean-Yves Blay(9)
Gilles Brisson(10)
Véronique Chabernaud(11)
Maïlys Ferrere(12)
Patrick Langlois(13)
Marcus Schindler(14)
Pascale Boissel
Joyson Karakunnel
Odile Belzunce(15)
Jennifer Butler
Frédérique Brune(16)
Eric Vivier, D.V.M.(17)
Tracy Rossin
Odile Laurent.(18)
All members of our Executive Board and Supervisory
Board and other executive officers as a group(19)
* Represents beneficial ownership of less than 1%.
9,817,546
7,485,500
6,389,406
342,511
161,056
114,328
1,235,884
45,100
50
98,059
24,210
19,141
23,580
500
114,476
500
2,179,395
12.43%
9.48%
8.09%
—%
0.43%
0.20%
0.14%
1.56%
0.06%
—%
0.12%
0.03%
—%
0.02%
—%
—%
—%
0.03%
—%
—%
0.14%
—%
—%
32.75%
(1) Consists of 9,817,546.00ordinary shares. The principal business address for Novo Nordisk A/S is Novo Allé, 2880 Bagsvaerd, Danemark.
(2) Consists of 7,485,500 ordinary shares. The principal business address for MedImmune Limited is Milstein Building, Granta Park,
Cambridge, CB21 6GH, United Kingdom.
(3) Consists of 6,389,406 ordinary shares. The principal business address for Bpifrance Participations is 27-31, avenue du Général Leclerc, 94
710 Maisons Alfort Cedex.
(4) Consists of 342,511.00 ordinary shares.
(5) Consists of 73,056.00 ordinary shares and 88,000.00 ordinary shares issuable upon the exercise of redeemable share warrants (BSAAR)
that are exercisable within 60 days of March 31, 2021
(6) Consists of 69,828.00 ordinary shares and 44,500.00 ordinary shares issuable upon the exercise of redeemable share warrants (BSAAR)
that are exercisable within 60 days of March 31, 2021.
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(7) Consists of 885,884.00 ordinary shares and 350,000.000 ordinary shares issuable upon the exercise of redeemable share warrants
(BSAAR) that are exercisable within 60 days of March 31, 2021.
(8) Consists of 25,100.00 ordinary shares and 20,000.00ordinary shares issuable upon the exercise of share warrants (BSA) that are
exercisable within 60 days of March 31, 2021.
(9) Consists of 50.00 ordinary shares.
(10)Consists of 73,059.00 ordinary shares and 25,000.00 ordinary shares issuable upon the exercise of share warrants (BSA) that are
exercisable within 60 days of March 31, 2021.
(11)Consists of 10.00 ordinary shares and 24,200.00 ordinary shares issuable upon the exercise of share warrants (BSA) that are exercisable
within 60 days of March 31, 2021.
(12)As representative of Bpifrance Participations, the legal entity that holds this Supervisory Board seat.
(13)Consists of 12,141.00 ordinary shares and 7,000.00 ordinary shares issuable upon the exercise of share warrants (BSA) that are exercisable
within 60 days of March 31, 2021.
(14)As representative of Novo Nordisk A/S, the legal entity that holds this Supervisory Board seat.
(15)Consists of 8,580.00 ordinary shares and 15,000.00 ordinary shares issuable upon the exercise of redeemable share warrants (BSAAR) that
are exercisable within 60 days of March 31, 2021.
(16)Consists of 500.00 ordinary shares.
(17)Consists of 114,476.00 ordinary shares.
(18)Consists of 500.00 ordinary shares.
The significant changes in the percentage ownership held by our principal shareholders since January 1,
2017 are a result of the transactions described in our prospectus dated October 16, 2019, filed with the
SEC pursuant to Rule 424(b), under the heading “Certain Relationships and Related Party Transactions—
Transactions with Our Principal Shareholders” and the dilution resulting from our public offering.
None of our principal shareholders has voting rights different than our other shareholders.
B. Related Party Transactions.
Since January 1, 2020, we have engaged in the following transactions with members of our Executive and
Supervisory Boards and holders of more than 5% of our outstanding voting securities, and their respective
affiliates, which we refer to as our related parties.
Transactions With Our Principal Shareholders
AstraZeneca
In January 2020, we entered into an "Operational Oversight Agreement with MedImmune and IQVIA
RDS Inc. under which Innate Pharma acted on behalf of Medimmune and became responsible for the
management of an observational study named PROXI (Post-Marketing Retrospective Observational
Safety Study of Lumoxiti) requested by the US Food and Drug Administration following the approval of
Lumoxiti on the US market. This observational study was originally initiated by MedImmune as sponsor
and IQVIA RDS Inc. as contract research organization (CRO). This three-party agreement ended in
March 2020 after the transfer of the BLA relating to Lumoxiti by MedImmune to Innate Pharma.
On February 17, 2020, we entered into a Clinical Manufacturing Services Agreement with AstraZeneca
for the manufacturing of lacutamab for the Tellomak trial.
In May 2020, we entered into a three-way agreement with AstraZeneca and EORTC to update the number
of patients and the term of a study conducted by EORTC with monalizumab, following the transfer of the
full-oncology rights to AstraZeneca in October 2018.
In July 2020, we entered into an amendment n°1 to the License Agreement signed on October 18, 2018
with MedImmune relating to Lumoxiti to extend the SOTC period (when Innate takes full responsibility
188
for commercialization of Lumoxiti in the US territory) and agree on some additional services (providing
Lumoxiti to patients under the Union Early Access Program and performing certain market access
services).
In October 2020, we entered into an Amendment n°2 to License Agreement with MedImmune and an
Amendment n°1 to Supply Agreement with AstraZeneca AB.
In December2020, we sent a termination notice to AstraZeneca to return the US and EU rights of
Lumoxiti granted under the license Agreement signed in 2018. All agreements with AstraZeneca relating
to Lumoxiti will terminate upon termination of the License Agreement.
Arrangements with the Members of our Executive and Supervisory Boards
Director and Executive Officer Compensation
See “Item 6B—Compensation—Limitations on Liability and Indemnification Matters” for information
regarding compensation of the members of our Supervisory and Executive Boards.
Agreement with Centre Léon Bérard
On May 11, 2020, we entered into a a third-party promoter agreement with Centre Léon Bérard, of which
Jean-Yves Blay, a Supervisory Board member, is the director.
The purpose of such agreement is to participate in a randomized, controlled study that will explore
monalizumab (IPH2201) and avdoralimab (IPH5401), among other treatment options, to investigate their
potential efficiency, compared to the standard of care, against COVID-19 in cancer patients with
pneumonia. This study is sponsored by Centre Léon Bérard in Lyon.
Under the terms of such agreement, the Company has agreed to provide its monalizumab (IPH2201) and
avdoralimab (IPH5401) for free and fund the study through a cash contribution amounting to €366,667.
This agreement will be effective until the end of the study, which is estimated to last 9 months.
Agreement with Novo Nordisk A/S
On 19 May 2020, the Supervisory Board authorized the execution of an amendment to the agreements
signed with Novo Nordisk A/S (NN) in connection with the NKG2A and C5Ar operations. The purpose
of the amendment is the repayment by Innate Pharma of the advance granted by Novo Nordisk A/S,
following the payment by the relevant tax authorities of the amounts of withholding tax refunds initially
paid. Under the terms of this amendment, Innate paid an amount of €588,305 to Novo Nordisk A/S.
Agreement with Bpifrance Financement
In the context of the COVID-19 pandemic, the French government has launched a call for collaborative
research and development projects aiming at developing therapeutic solutions to prevent or cure
COVID-19. Projects selected by the French government are eligible to receive funding from the French
government under the Programme d'Investissements d'Avenir (PIA) managed by Bpifrance Financement
(BPI). Such funding takes the form of grants and repayable advances and provides for profit sharing.
Innate Pharma was selected by BPI to finance its current projects relating to COVID-19. In connection
with such selection, we executed two agreements with BPI, the Master Agreement and the Beneficiary
Agreement.
The Master Agreement and the Beneficiary Agreement set forth (i) the terms and conditions for the
payment of the aid granted by Bpifrance Financement to Innate Pharma and its partners involved in the
"FORCE" project (Assistance Publique – Hôpitaux de Marseille and Centre Léon Bérard) as well as (ii)
the terms and conditions for the financial returns due by the beneficiaries of the aid to Bpifrance
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Financement. The "FORCE" project includes the translational research study EXPLORE COVID-19 with
AP-HM and the two Phase II clinical trials, FORCE with AP-HM and ImmunONCOVID-20 with the
Centre Léon Bérard.
The funding amounts to a total of €6,800,000, divided as follows: 20% in the form of a grant with no
repayment condition and 80% in the form of an advance repayable only in the event of technical and
commercial success. The first instalment of €1,700,000 was paid on signature of the agreements, and the
three remaining instalments will be paid depending on the achievement of certain clinical milestones,
notably those related to the Phase II FORCE trial.
The agreement is concluded for a period up to the full repayment of any sums due to Bpifrance
Financement.
Agreement with Jean-Yves Blay
Pursuant to the authorization of the Supervisory Board on 22 May 2019, on 7 September 2020, the
Supervisory Board authorized the conclusion of a specific mission Agreement, pursuant to Article
L.225-84 of the French Commercial Code, between Innate Pharma and Jean-Yves Blay, who was given
the task of providing consulting services to the Company's Strategic Advisory Board.
This mission began on 1 September 2020 and will end on 30 June 2021. It may be renewed if Mr Blay is
reappointed as a member of the Company's Supervisory Board.
Mr. Jean Yves Blay will receive remuneration at an hourly rate of €250 excluding VAT, the total of
which may under no circumstances exceed €10,000 for the duration of the Agreement.
Indemnification Agreement with Pascale Boissel
In the context of the Nasdaq IPO and regarding the need to put in place insurances for the liability of
officers of listed companies in the US, the Supervisory board of September 12, 2019 decided :
The entering into of a policy insurance covering the risks in relation with the Nasdaq IPO (IPO
(i)
insurance) and the insurance policy extension for companies listed on the Nasdaq (D&O insurance
policy) ; and
The entering into of indemnification agreement between the Company on the one hand and the
(ii)
Supervisory and Executive board member on the other hand.
Such indemnification agreements provides that the Company would cover Supervisory Board members
and Executive Board members in situations in which the IPO and D&O insurance policies would not
cover them, but always within the limits of what is legally possible in terms of indemnification of
directors and officers.
Following the appointment of Pascale Boissel as a member of the Supervisory Board on 19 May 2020, the
Supervisory Board meeting of 7 September 2020 authorized the conclusion of an Indemnity Agreement
with Pascale Boissel.
This Agreement has a duration equivalent to the term of office of the Supervisory Board member, with
retroactive effect to the date of appointment (May 19, 2020).
Transaction with Related Companies
From time to time, in the ordinary course of our business, we may contract for services from companies
or institutions in which certain members of our Executive Board or Supervisory Board may serve as a
190
director or advisor. The cost and provision of these services are negotiated on an arms-length basis and
none of these arrangements are material.
In December 2020, we entered into a Collaboration and Research Agreement with the Centre
d'Immunologie de Marseille Luminy of which Eric Vivier (permanent guest of the Executive Committee)
is Associate Team Leader. The Supervisory Board of December 16, 2020, after having reviewed the
agreement, has decided that this agreement was similar to other agreements we have been entering in the
ordinary course of our business and therefore approved the entry into such agreement, The Collaboration
and Research Agreement provides for a maximum aggregate cash consideration equal to €300,000
payable to the Centre d'Immunologie de Marseille Luminy and the duration of the Collaboration and
Research Agreement is 5 years.
Related Person Transaction Policy
We comply with French law regarding approval of transactions with related parties. On September 12,
2019, the Supervisory Board adopted a related person transaction policy that sets forth our procedures for
the identification, review, consideration and approval or ratification of related person transactions. The
policy became effective immediately upon the execution of the underwriting agreement for the October
2019 global offering. For purposes of our policy only, a related person transaction is a transaction,
arrangement or similar contractual relationship, or any series of similar transactions, arrangements or
relationships, in which we and any related person are, were or will be participants and the amount
involved in the transaction exceeds $120,000, with the exception of usual transactions concluded under
normal conditions. A related person is any member of the Executive Board or Supervisory Board or
beneficial owner of more than 5% of any class of our voting securities, including any of their immediate
family members and any entity owned or controlled by such persons.
Under the policy, if a transaction has been identified as a related person transaction, including any
transaction that was not a related person transaction when originally consummated or any transaction that
was not initially identified as a related person transaction prior to consummation, our management must
present information regarding the related person transaction to the Supervisory Board for review,
consideration and approval or ratification. The presentation must include a description of, among other
things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the
transaction and whether the transaction is on terms that are comparable to the terms available to or from,
as the case may be, an unrelated third-party or to or from employees generally. Under the policy, we will
collect information that we deem reasonably necessary from each member of our Executive Board and
Supervisory Board and, to the extent feasible, significant shareholder to enable us to identify any existing
or potential related-person transactions and to effectuate the terms of the policy.
In addition, under our Code of Business Conduct and Ethics, which we adopted on September 12, 2019,
our employees and Executive and Supervisory Board members have an affirmative responsibility to
disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of
interest.
In considering related person transactions, the Supervisory Board, will take into account the relevant
available facts and circumstances including, but not limited to:
•
•
the risks, costs and benefits to us;
the impact on the independence of a member of the Executive Board or Supervisory Board in the
event that the related person is a member of the Executive Board or Supervisory Board, immediate
191
family member of a member of the Executive Board or Supervisory Board or an entity with which a
member of Executive Board or Supervisory Board is affiliated;
•
•
the availability of other sources for comparable services or products; and
the terms available to or from, as the case may be, unrelated third parties or to or from employees
generally.
The policy requires that, in determining whether to approve, ratify or reject a related person transaction,
the Supervisory Board must consider, in light of known circumstances, whether the transaction is in, or is
not inconsistent with, our best interests and those of our shareholders, as the Supervisory Board
determines in the good faith exercise of its discretion.
All of the transactions described above were entered into prior to the adoption of the written policy, but
our Supervisory Board evaluated and approved all transactions that were considered to be related party
transactions under French law at the time at which they were consummated.
C. Interests of Experts and Counsel.
Not applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information.
Consolidated Financial Statements
Our consolidated financial statements are included as part of this Annual Report, starting at page F-1.
Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings relating to claims arising
out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our
management, are likely to have a material adverse effect on our business. Regardless of outcome,
litigation can have an adverse impact on us because of defense and settlement costs, diversion of
management resources and other factors.
Dividend Policy
We have never declared or paid any dividends on our ordinary shares. We do not anticipate paying cash
dividends on our equity securities in the foreseeable future and intend to retain all available funds and any
future earnings for use in the operation and expansion of our business, given our state of development.
Subject to the requirements of French law and our bylaws, dividends may only be distributed from our
distributable profits, plus any amounts held in our available reserves which are reserves other than legal
and statutory and revaluation surplus. Dividend distributions, if any in the future, will be made in euro
and converted into U.S. dollars with respect to the ADSs, as provided in the deposit agreement. See the
information set forth in our prospectus dated October 16, 2019, filed with the SEC pursuant to Rule
424(b), under the heading “Description of Share Capital” for more information.
B. Significant Changes.
Not applicable.
Item 9. The Offer and Listing.
192
A. Offer and Listing Details.
Our ADSs have been listed on the Nasdaq Global Select Market under the symbol “IPHA” since October
21, 2019. Our ordinary shares have been trading on Euronext Paris under the symbol “IPH” since
November 3, 2006. Prior to that date, there was no public trading market for our ADSs or our ordinary
shares.
B. Plan of Distribution.
Not applicable.
C. Markets.
Our ADSs have been listed on Nasdaq under the symbol “IPHA” since October 21, 2019. Our ordinary
shares have been trading on Euronext Paris under the symbol “IPH” since November 3, 2006.
D. Selling Shareholders.
Not applicable.
E. Dilution.
Not applicable.
F. Expenses of the Issue.
Not applicable.
Item 10. Additional Information.
A. Share Capital.
Not applicable.
B. Memorandum and Articles of Association.
The information set forth in our prospectus dated October 16, 2019, filed with the SEC pursuant to Rule
424(b), under the heading “Description of Share Capital—Key Provisions of Our Bylaws and French Law
Affecting Our Ordinary Shares,” “Description of Share Capital—Differences in Corporate Law,” and
“Limitations Affecting Shareholders of a French Company” is incorporated herein by reference.
C. Material Contracts.
Strategic Collaborations and License Agreements
AstraZeneca
2015 Agreements
In April 2015, we entered into two agreements with MedImmune, a wholly owned subsidiary of
AstraZeneca, which we refer to as AstraZeneca. The first agreement was a co-development and license
agreement relating to certain combination products containing monalizumab, or the Original Co-
Development Agreement, and the second agreement was a development and option agreement for
products containing monalizumab, including products using monalizumab as a monotherapy, or the 2015
Option Agreement. We received an initial payment of $250 million under these agreements on June 30,
2015, of which $100 million was paid to us as an initial payment for the Original Co-Development
Agreement and $150 million was paid to us as consideration for the 2015 Option Agreement described
below. In October 2018, AstraZeneca exercised its option under the 2015 Option Agreement, which
193
resulted in the automatic termination of both the Original Co-Development Agreement and the 2015
Option Agreement, and a new co-development and license agreement relating to all products containing
monalizumab, or the 2015 Co-Development Agreement, automatically came into effect. In connection
with AstraZeneca’s exercise of its option under the 2015 Option Agreement, an upfront payment of $100
million was due under the 2015 Co-Development Agreement, which it paid in January 2019.
2015 Co-Development Agreement
Under the 2015 Co-Development Agreement, we granted to AstraZeneca a worldwide, exclusive license,
subject to certain exclusions, to certain of our patents and know-how to develop, manufacture and
commercialize licensed products, including monalizumab, in the field of diagnosis, prevention and
treatment of oncology diseases and conditions. We further granted to AstraZeneca a worldwide, non-
exclusive license to certain of our other patents to develop, manufacture and commercialize licensed
products, including monalizumab, in the field of diagnosis, prevention and treatment of oncology diseases
and conditions. We retain the rights under the licensed patents and know-how to, among other things, co-
promote licensed products in certain European countries, pursuant to our option to co-promote, and
exploit the licensed patents and know-how to research, develop and commercialize the licensed products
outside of the field of diagnosis, prevention and treatment of oncology diseases and conditions.
Under the 2015 Co-Development Agreement, we are required to collaborate with AstraZeneca to develop
and commercialize licensed products. AstraZeneca will be the lead party in developing the licensed
products and licensed product in certain major markets. Each party will have to use commercially
reasonable efforts to complete certain development activities in accordance with a specified development
plan.
We are required for a defined period of time to co-fund 30% of the Phase III clinical trials of licensed
products, subject to an aggregate cap, in order to receive 50% of the profits in Europe.
On July 31, 2019, we notified AstraZeneca of our decision to co-fund future monalizumab Phase 3
clinical development program. In October 2020, AstraZeneca enrolled the first patient in the first Phase 3
trial which triggered a $50 million milestone payment from AstraZeneca to Innate. AstraZeneca will be
responsible for the promotion of licensed products worldwide, subject to our option to co-promote the
licensed products in certain European countries. Should we elect not to co-promote, our share of profits in
Europe will be reduced by a specified amount of percentage points not to exceed the mid-single digits.
The development by AstraZeneca of a licensed product under the 2015 Co-Development Agreement is
subject to certain reciprocal non-compete obligations.
AstraZeneca is obligated to pay us up to $875 million in the aggregate upon the achievement of certain
development and regulatory milestones ($450 million), including commercialization milestones ($425
million). As described above, the arrangement also provides for a 50% profit share and, subject to certain
deferrals of reimbursement, loss share of licensed products in Europe if we do not opt out of our co-
funding and co-promoting obligations. In addition, we will be eligible to receive tiered royalties ranging
from a low double-digit to mid-teen percentage on net sales of licensed products outside of Europe. The
royalties payable to us under the 2015 Co-Development Agreement may be reduced under certain
circumstances, including loss of exclusivity or lack of patent protection.
Our right to receive royalties under the 2015 Co-Development Agreement expires, on a licensed product-
by-licensed product and country-by-country basis, on the latest of: (i) the tenth anniversary of the first
commercial sale of such licensed product in such country, or in the case of European countries, in any
European country, (ii) the expiration of regulatory exclusivity for such licensed product in such country
194
and (iii) the expiration of the last-to-expire valid licensed patent claim subject to the agreement that
covers such licensed product in such country.
Unless earlier terminated, the term of the 2015 Co-Development Agreement will expire on the date on
which all of AstraZeneca’s payment obligations have expired. We may terminate the 2015 Co-
Development Agreement if AstraZeneca challenges any patent licensed to it under the agreement.
AstraZeneca may terminate the 2015 Co-Development Agreement in its entirety for convenience at any
time effective upon 120 days’ prior written notice to us. Either party may terminate the 2015 Co-
Development Agreement in the event of an uncured material breach by the other party or for certain
bankruptcy or insolvency events involving the other party.
If the 2015 Co-Development Agreement is terminated by AstraZeneca for convenience or by us for
AstraZeneca’s material breach, insolvency or a patent challenge by AstraZeneca, all licenses and rights
granted under the agreement terminate, however, upon any such termination, AstraZeneca would grant us
an exclusive, worldwide, royalty-bearing right and license, with the right to grant sublicenses, under
technology developed by AstraZeneca and incorporated into or necessary for the exploitation of licensed
products, except for certain manufacturing technology that would require a separate agreement. If the
2015 Co-Development Agreement is terminated by AstraZeneca for our material breach or insolvency,
AstraZeneca has the right to continue the agreement by providing written notice to us. If AstraZeneca
provides us with such written notice, among other things, our rights under the co-promote option will
terminate and we must cease any development, manufacture or commercialization activities under the
agreement.
2018 CD39 Option Agreement
In October 2018, we entered into a collaboration and option agreement relating to IPH5201. We received
an initial payment of $50 million under this agreement, $26 million of which was received in October
2018 and $24 million of which was received in January 2019. Pursuant to the 2018 CD39 Option
Agreement, we granted to AstraZeneca an exclusive option to obtain an exclusive license to certain of our
patents and know-how to develop and commercialize licensed products, including IPH5201 in the field of
the diagnosis, prevention and treatment of all diseases and conditions in humans or animals, subject to
certain limitations.
Under the 2018 CD39 Option Agreement, we must collaborate with AstraZeneca to develop CD39 option
products. Prior to the expiration of the option period, we and AstraZeneca are subject to certain non-
compete obligations.
AstraZeneca is responsible for funding the research and development costs of CD39 option products
contemplated in the joint development plan. Additionally, we may conduct certain exploratory clinical
studies at our own cost, subject to reimbursement by AstraZeneca with a premium under certain
circumstances related to subsequent development by AstraZeneca.
Following the dosing of the first patient on March 9, 2020 in the IPH5201 Phase I clinical trial,
AstraZeneca made a $5 million milestone payment to Innate. Pursuant to the 2018 CD39 Option
Agreement, AstraZeneca is obligated to pay us $5 million upon the achievement of certain development
milestones.
Unless earlier terminated, the term of the 2018 CD39 Option Agreement will expire on the earlier of
exercise of the option or expiration of the option period in the event that AstraZeneca does not exercise
the option. We may terminate the 2018 CD39 Option Agreement if AstraZeneca challenges any option
patent. AstraZeneca may terminate the 2018 CD39 Option Agreement in its entirety for convenience at
any time effective upon three months’ prior written notice to us. Either party may terminate the 2018
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CD39 Option Agreement in the event of an uncured material breach by the other party or for certain
bankruptcy or insolvency events involving the other party.
CD39 Co-Development and License Agreement Upon Option Exercise by AstraZeneca
Upon exercise of the option under the 2018 CD39 Option Agreement, we would enter into a co-
development and license agreement with AstraZeneca, or the CD39 Potential License Agreement. Under
the CD39 Potential License Agreement, we would grant to AstraZeneca a worldwide, exclusive license,
subject to certain exclusions, to certain of our patents and know-how regarding, among other things, our
IPH5201 candidate, to develop, manufacture and commercialize licensed products in the field of
diagnosis, prevention and treatment of diseases and conditions in humans and in animals, subject to
certain limitations. We would retain certain rights under the licensed patents and know-how to, among
other things, co-promote licensed products in certain European countries, pursuant to our option to co-
promote.
The CD39 Potential License Agreement provides for a payment of $25 million upon exercise.
Additionally, AstraZeneca would be obligated to pay us up to $795 million in the aggregate upon the
achievement of certain development and regulatory milestones ($295 million) and commercialization
milestones ($500 million). The arrangement also provides for a 50% profit share in Europe if we opt into
certain co-promoting and late stage co-funding obligations. In addition, we would be eligible to receive
tiered royalties ranging from a high-single digit to mid-teen percentage on net sales of IPH5201, or from a
mid-single digit to low-double digit percentage on net sales of other types of licensed products, outside of
Europe. The royalties payable to us under the CD39 Potential License Agreement may be reduced under
certain circumstances, including loss of exclusivity or lack of patent protection.
Under the CD39 Potential License Agreement, unless we have elected not to co-fund, we would be
required to collaborate with AstraZeneca to develop and commercialize licensed products. AstraZeneca
would be the lead party in developing and commercializing the licensed products and each party must use
commercially reasonable efforts to develop, obtain regulatory approval and commercialize at least one
licensed product in certain major markets. Each party would have to use commercially reasonable efforts
to complete its development activities in accordance with a specified development plan.
We would have the option to co-fund 30% of the Phase III clinical trials of licensed products in order to
share in 50% of the profits and losses of licensed products in Europe. If we do not exercise this co-
funding option, among other things, our right to share in 50% of the profits and losses in Europe and right
to co-promote in certain European countries will terminate and will be replaced by rights to receive
royalties on net sales at the rates applicable to outside of Europe. Additionally, certain milestone
payments that may be payable to us would be reduced. AstraZeneca would be responsible for the
promotion of licensed products worldwide, subject to our option to co-promote the licensed products in
certain European countries if we elect to co-fund. Additionally, we would have a right of first negotiation
in the event that AstraZeneca wishes to grant a third-party the right to commercialize licensed products in
Europe or the United States.
The development by AstraZeneca of a licensed product under the Potential License Agreement is subject
to certain reciprocal non-compete obligations.
Our right to receive royalties under the CD39 Potential License Agreement expires, on a licensed product-
by-licensed product and country-by-country basis, on the latest of: (i) the tenth anniversary of the first
commercial sale of such licensed product in such country, or, in the case of European countries, in any
European country, (ii) the expiration of regulatory exclusivity for such licensed product in such country
and (iii) the expiration of the last-to-expire valid licensed patent claim subject to the agreement that
covers such licensed product in such country.
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Unless earlier terminated, the term of the CD39 Potential License Agreement would expire on the date on
which all of AstraZeneca’s payment obligations have expired. We may terminate the CD39 Potential
License Agreement if AstraZeneca challenges any patent licensed to it under the agreement. AstraZeneca
may terminate the CD39 Potential License Agreement in its entirety for convenience at any time effective
upon 120 days’ prior written notice to us. Either party may terminate the CD39 Potential License
Agreement in the event of an uncured material breach by the other party or for certain bankruptcy or
insolvency events involving the other party.
2018 Future Programs Option Agreement
In October 2018, we entered into another option agreement with AstraZeneca, relating to four pre-clinical
programs. We received an initial payment of $20 million at signing. Pursuant to the 2018 Future
Programs Option Agreement, we granted to AstraZeneca four exclusive options that are exercisable until
IND approval to obtain a worldwide, royalty-bearing, exclusive license to certain of our patents and
know-how relating to certain specified pipeline candidates to develop and commercialize optioned
products in all fields of use. The relevant programs are IPH43, IPH25, the anti-Siglec-9 antibody program
and a multi-specific NKp46 NKCE program. Upon exercise of an option, we would be entitled to an
option exercise payment of $35 million, as well as development and regulatory milestone payments ($320
million) and commercialization milestone payments ($500 million) and tiered, mid-single digit to mid-
teen percentage royalties on net sales of the applicable product. The royalties payable to us may be
reduced under certain circumstances, including loss of exclusivity, lack of patent protection or the specific
nature of the compound included within the applicable product. Additionally, we would have rights to co-
fund certain development costs in order to obtain profit and loss sharing in Europe. So long as we elect to
co-fund such development costs, we also will have a right to co-promote optioned products in Europe.
License Agreement for Lumoxiti
In October 2018, we entered into a third agreement with AstraZeneca relating to the licence of Lumoxiti.
We made an initial payment to AstraZeneca of $50 million under this agreement in January 2019.
Pursuant to the Lumoxiti Agreement, we obtained an exclusive license under certain patents and know-
how of AstraZeneca to develop, manufacture and commercialize Lumoxiti for all uses in humans and
animals in the United States, the European Union and Switzerland. $15 million were paid to AstraZeneca
when filing of the BLA in Europe. In connection with the Lumoxiti Agreement, we also obtained an
exclusive sublicense from AstraZeneca under certain third-party intellectual property rights. In
consideration for such sublicense we are obligated to pay a low single digit royalty on our net sales of
Lumoxiti, as well as milestone payments up to approximately $1 million in the aggregate.
In addition, pursuant to the Lumoxiti Agreement we entered into a supply agreement with AstraZeneca
relating to the exclusive manufacturing and supply by AstraZeneca of Lumoxiti in connection with its
commercialization in the U.S., the European Union, the United Kingdom and Switzerland.
Under the Lumoxiti Agreement, we have a right of first negotiation in the event that AstraZeneca intends
to grant rights to commercialize Lumoxiti outside of the United States, the European Union and
Switzerland.
We may terminate the Lumoxiti Agreement upon certain prior notice to AstraZeneca.
In December 2020, we exercised our right of termination by sending a termination notice of the Lumoxiti
Agreement to AstraZeneca.
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Additional agreements related to Monalizumab
Novo Nordisk A/S
On February 5, 2014, we in-licensed the full development and commercialization rights to monalizumab r
from Novo Nordisk A/S. In consideration for these rights, we paid Novo Nordisk A/S €2 million in cash
and 600,000 of our ordinary shares at a price of €8.33 per share. Novo Nordisk A/S is eligible to receive a
total of €20 million in potential regulatory milestones and tiered mid-to-high single-digit percentage
royalties on future net sales.
The agreement with Novo Nordisk A/S included a right to additional consideration in the event of an out-
licensing agreement. Consequently, following the agreement signed with AstraZeneca in April 2015, we
paid Novo Nordisk A/S an additional consideration amount of €6.5 million.
In October 2018 AstraZeneca exercised its option under the 2015 Option Agreement to acquire an
exclusive license to monalizumab. Pursuant to this option exercise, AstraZeneca paid $100 million to us
and, as a result, Novo Nordisk A/S became entitled to a second and final payment amounting to $15.0
million (€13.1 million). If the AstraZeneca agreement is terminated for any reason, we will pay to Novo
Nordisk A/S a portion of any amounts that have been budgeted but have not been spent or will not be
spent under the initial research and development budget. In light of current development plans and
research and development costs incurred to date, we do not currently expect any amounts to be paid
pursuant to this provision.
License Agreement with Novo Nordisk for avdoralimab
In July of 2017 we entered into an exclusive license agreement with Novo Nordisk A/S relating to
avdoralimab, or the 2017 Novo Agreement, pursuant to which we obtained a worldwide, exclusive license
under certain patents and know-how of Novo Nordisk A/S to develop, manufacture and commercialize
pharmaceutical products that contain or comprise an Anti-C5aR antibody. We made an initial payment to
Novo Nordisk A/S of €40.0 million under the 2017 Novo Agreement which was offset against Novo
Nordisk A/S’s subscription in new shares. We are obligated to pay Novo Nordisk A/S in the aggregate up
to €370.0 million upon achievement of certain development, regulatory and sales milestones and tiered
royalties ranging from a low double-digit to low teen percentage on net sales. Our royalty payment
obligations are subject to certain reductions and expire on a product-by-product and country-by-country
basis upon the later of the date the exploitation of a licensed product is no longer covered by a claim of a
licensed patent in such country, loss of data or regulatory exclusivity in such country, and the twelfth
anniversary of the first commercial sale of such product in such country. In connection with the 2017
Novo Agreement, we obtained an exclusive sublicense from Novo Nordisk A/S under certain third-party
intellectual property rights. In consideration for such sublicense we may be obligated to pay a mid-single
digit royalty on our net sales of a licensed product, however, we will be entitled to offset such payments
against royalties payable to Novo Nordisk A/S.
Under the 2017 Novo Agreement, we are obligated to use commercially reasonable efforts to develop and
seek regulatory approval for a licensed product.
The 2017 Novo Agreement shall expire upon expiration of the last royalty payment obligation under the
agreement. Either party may terminate the 2017 Novo Agreement upon any uncured material breach of
the agreement by the other party or upon a bankruptcy or insolvency of the other party. Additionally,
Novo Nordisk A/S may terminate the agreement in the event we challenge any patent licensed under the
agreement. We may terminate the 2017 Novo Agreement upon prior notice to Novo Nordisk A/S.
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In 2020, we made a payment to Novo Nordisk A/S of €1 million under the 2017 Novo Agreement,
covered by BPI funding, in respect of the start of a phase 2 clinical trial of avdoralimab in COVID-19
patients with severe pneumonia.
Collaboration and licensing agreement with Sanofi
We entered into a research collaboration and licensing agreement with Sanofi in January 2016 to apply
our proprietary technology to the development of bispecific antibody formats engaging NK cells to kill
tumor cells through the activating receptor NKp46. We granted to Sanofi under certain of our intellectual
property a non-exclusive, worldwide, royalty-free research license, as well as an exclusive, worldwide
license to research, develop and commercialize products directed against two specified targets, for all
therapeutic, prophylactic and diagnostic indications and uses.
We will work together with Sanofi on the generation and evaluation of up to two bispecific NK cell
engagers, using our technology and Sanofi’s tumor targets. Under the terms of the license agreement,
Sanofi will be responsible for the development, manufacturing and commercialization of products
resulting from the research collaboration. We will be eligible for up to €400.0 million in payments,
primarily upon the achievement of development and commercial milestones, as well as royalties ranging
from a mid to high single-digit percentage on net sales.
On January 5th, 2021, we announced that Sanofi has made the decision to progress IPH6101/SAR443579
into investigational new drug (IND)-enabling studies. IPH6101/SAR443579 is a NKp46-based NK cell
engager (NKCE) using Innate’s proprietary multispecific antibody format. The decision triggered a €7M
milestone payment from Sanofi to Innate. Sanofi will be responsible for all future development,
manufacturing and commercialization of IPH6101/SAR443579. Additionally, in January 2021, a GLP-tox
study was initiated for the IPH6101/SAR443579 program.
Orega License Agreement
Pursuant to our licensing agreement with Orega Biotech, we acquired an exclusive license to Orega
Biotech’s intellectual property rights relating to its anti-CD39 checkpoint inhibitor program. As of
December 31, 2019, we had paid a total amount of €1.8 million to Orega Biotech for the acquisition of
these intellectual property rights, and in June of 2019 we paid Orega Biotech €7.0 million in relation to
the anti-CD39 program as consideration relating to the collaboration and option agreement signed on
October 22, 2018 with AstraZeneca for IPH5201. Following the dosing of the first patient on March 9,
2020 in the IPH5201 Phase I clinical trial, AstraZeneca made a $5 million milestone pursuant to our
collaboration agreement with AstraZeneca and we are obligated to make a €2.7 million milestone
payment to Orega Biotech SAS pursuant to our licensing agreement with Orega Biotech SAS. We may
also be obligated to pay Orega Biotech up to an additional €48.8 million in the aggregate upon the
achievement of development and regulatory milestones, and mid-single digit to low-teen percentage
payments, depending on determinations relating to Orega Biotech’s intellectual property rights for certain
patents, on sublicensing revenues we receive pursuant to our agreement with AstraZeneca relating to
IPH5201.
The summaries provided above do not purport to be complete and are qualified in their entirety by
reference to the complete agreements, which are attached as exhibits to this Annual Report on Form 20-F.
For additional information on our material contracts, please see “Item 4. Information on the Company,”
“Item 6. Directors, Senior Management and Employees,” and “Item 7.B. Related Party Transactions” of
this Annual Report on 20-F.
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D.
Exchange Controls.
Under current French foreign exchange control regulations there are no limitations on the amount of cash
payments that we may remit to residents of foreign countries. Laws and regulations concerning foreign
exchange controls do, however, require that all payments or transfers of funds made by a French resident
to a non-resident such as dividend payments be handled by an accredited intermediary. All registered
banks and substantially all credit institutions in France are accredited intermediaries.
E.
Taxation.
Material U.S. Federal Income Tax Considerations
The following describes material U.S. federal income tax considerations relating to the acquisition,
ownership and disposition of our ordinary shares or ADSs by a U.S. holder (as defined below) who hold
our ordinary shares or ADSs as capital assets. This summary does not address all U.S. federal income tax
matters that may be relevant to a particular U.S. holder. This summary does not address tax
considerations applicable to a holder of our ordinary shares or ADSs that may be subject to special tax
rules including, without limitation, the following:
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•
•
•
•
•
•
•
•
•
•
banks, financial institutions or insurance companies;
brokers, dealers or traders in securities, currencies, commodities, or notional principal contracts;
tax-exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as
defined in Section 408 or 408A of the Code (as defined below), respectively;
real estate investment trusts, regulated investment companies or grantor trusts;
persons that hold our ordinary shares or ADSs as part of a “hedging,” “integrated,” “wash sale” or
“conversion” transaction or as a position in a “straddle” for U.S. federal income tax purposes;
corporations, partnerships, or other entities or arrangements classified as partnerships for U.S.
federal income tax purposes;
certain former citizens or long-term residents of the United States;
persons that received our ordinary shares or ADSs as compensation for the performance of services;
persons acquiring our ordinary shares or ADSs in connection with a trade or business conducted
outside of the United States, including a permanent establishment or a fixed base in France;
holders that own directly, indirectly, or through attribution 10% or more of the voting power or
value of our ordinary shares or ADSs; and
holders that have a “functional currency” other than the U.S. dollar.
Holders of our ordinary shares or ADSs who fall within one of the categories above are advised to consult
their tax advisor regarding the specific tax consequences which may apply to their particular situation.
For the purposes of this description, a “U.S. holder” is a beneficial owner of our ordinary shares or ADSs
that is (or is treated as), for U.S. federal income tax purposes:
•
•
•
an individual who is a citizen or resident of the United States;
a corporation created or organized in or under the laws of the United States, any state therein or the
District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
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•
a trust, if a court within the United States is able to exercise primary supervision over its
administration and one or more U.S. persons have the authority to control all of the substantial
decisions of such trust, or if such trust has a valid election in effect under applicable U.S. Treasury
Regulations to be treated as a U.S. person.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our
ordinary shares or ADSs, the tax consequences relating to an investment in our ordinary shares or ADSs
will depend in part upon the status of the partner and the activities of the partnership. Such a partner or
partnership should consult its tax advisor regarding the specific tax considerations of acquiring, owning
and disposing of our ordinary shares or ADSs in its particular circumstances.
Persons considering an investment in our ordinary shares or ADSs should consult their own tax
advisors as to the particular tax consequences applicable to them relating to the acquisition,
ownership and disposition of our ordinary shares or ADSs, including the applicability of U.S.
federal, state and local tax laws, French tax laws and other non-U.S. tax laws.
This description does not address the U.S. federal estate, gift, or alternative minimum tax considerations,
the Medicare tax on net investment income or any U.S. state, local, or non-U.S. tax considerations of the
acquisition, ownership and disposition of our ordinary shares or ADSs.
This description is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, existing,
proposed and temporary U.S. Treasury Regulations promulgated thereunder and administrative and
judicial interpretations thereof, in each case as of the date hereof. All the foregoing is subject to change,
which change could apply retroactively, and to differing interpretations, all of which could affect the tax
considerations described below. There can be no assurances that the U.S. Internal Revenue Service, or the
IRS, will not take a position concerning the tax consequences of the acquisition, ownership and
disposition of our ordinary shares or ADSs or that such a position would not be sustained by a court. We
have not obtained, nor do we intend to obtain, a ruling with respect to the U.S. federal income tax
considerations of the purchase, ownership or disposition of our ordinary shares or ADSs. Accordingly,
holders should consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax
consequences of acquiring, owning and disposing of our ordinary shares or ADSs in their particular
circumstances.
As indicated below, this summary is subject to the discussion below of the U.S. federal income tax rules
applicable to a “passive foreign investment company,” or a PFIC.
In general, and taking into account the earlier assumptions, for U.S. federal income tax purposes, a U.S.
holder holding ADSs will be treated as the owner of the ordinary shares represented by the ADSs.
Exchanges of ordinary shares for ADSs, and ADSs for ordinary shares, generally will not be subject to
U.S. federal income tax.
Distributions. Subject to the discussion under “—Passive Foreign Investment Company Considerations,”
below, the gross amount of any distribution (including any amounts withheld in respect of foreign tax)
actually or constructively received by a U.S. holder with respect to our ordinary shares or ADSs will
generally be taxable to the U.S. holder as a dividend to the extent of the U.S. holder’s pro rata share of
our current or accumulated earnings and profits as determined under U.S. federal income tax principles.
Distributions in excess of earnings and profits will generally be non-taxable to the U.S. holder to the
extent of, and will be applied against and reduce, the U.S. holder’s adjusted tax basis in our ordinary
shares or ADSs. Distributions in excess of earnings and profits and such adjusted tax basis will generally
be taxable to the U.S. holder as either long-term or short-term capital gain depending upon whether the
U.S. holder has held our ordinary shares or ADSs for more than one year as of the time such distribution
is received. However, since we do not calculate our earnings and profits under U.S. federal income tax
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principles, it is expected that any distribution will be reported as a dividend, even if that distribution
would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described
above. Non-corporate U.S. holders may qualify for the preferential rates of taxation with respect to
dividends on our ordinary shares or ADSs applicable to long-term capital gains (i.e., gains from the sale
of capital assets held for more than one year), or qualified dividend income if we are a “qualified foreign
corporation” and certain other requirements are met. A non-U.S. corporation (other than a corporation
that is a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally
will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a
comprehensive tax treaty with the United States which the Secretary of Treasury of the United States
determines is satisfactory for purposes of this provision and which includes an exchange of information
provision, or (b) with respect to any dividend it pays on ADSs which are readily tradable on an
established securities market in the United States. Our ADSs are listed on the Nasdaq Global Select
Market, which is an established securities market in the United States, and we believe the ADSs are
readily tradable on the Nasdaq Global Select Market. There can be no assurance that the ADSs will
continue to be considered readily tradable on an established securities market in the United States in later
years. The Company, which is incorporated under the laws of France, believes that it qualifies as a
resident of France for purposes of, and is eligible for the benefits of, the Convention between the
Government of the United States of America and the Government of the French Republic for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income
and Capital, signed on August 31, 1994, as amended and currently in force, or the U.S.-France Tax
Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-
France Tax Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an
exchange-of-information program. Therefore, subject to the discussion under “—Passive Foreign
Investment Company Considerations,” below, such dividends will generally be “qualified dividend
income” in the hands of individual U.S. holders, provided that a holding period requirement (more than
60 days of ownership, without protection from the risk of loss, during the 121-day period beginning 60
days before the ex-dividend date) and certain other requirements are met. The dividends will not be
eligible for the dividends-received deduction generally allowed to corporate U.S. holders.
A U.S. holder generally may claim the amount of any French withholding tax on a distribution as either a
deduction from gross income or a credit against its U.S. federal income tax liability. The foreign tax credit
is subject to numerous complex limitations that must be determined and applied on an individual basis.
Generally, the credit cannot exceed the proportionate share of a U.S. holder’s U.S. federal income tax
liability that such U.S. holder’s taxable income bears to such U.S. holder’s worldwide taxable income. In
applying this limitation, a U.S. holder’s various items of income and deduction must be classified, under
complex rules, as either “foreign source” or “U.S. source.” In addition, the creditability of foreign taxes
could be affected by actions taken by intermediaries in the chain of ownership between the holders of our
ordinary shares or ADSs and our company if, as a result of such actions, the holders of our ordinary
shares or ADSs are not properly treated as beneficial owners of the underlying ordinary shares. Each U.S.
holder should consult its own tax advisors regarding the foreign tax credit rules.
In general, the amount of a distribution paid to a U.S. holder in a foreign currency will be the U.S. dollar
value of the foreign currency calculated by reference to the spot exchange rate on the day the depositary
receives the distribution, in the case of the ADSs, or on the day the distribution is received by the U.S.
holder, in the case of ordinary shares, regardless of whether the foreign currency is converted into U.S.
dollars at that time. Any foreign currency gain or loss a U.S. holder realizes on a subsequent conversion
of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received in
a foreign currency are converted into U.S. dollars on the day they are received, a U.S. holder should not
be required to recognize foreign currency gain or loss in respect of the dividend.
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Sale, Exchange or Other Taxable Disposition. A U.S. holder will generally recognize gain or loss for
U.S. federal income tax purposes upon the sale, exchange or other taxable disposition of our ordinary
shares or ADSs in an amount equal to the difference between the amount realized from such sale or
exchange and the U.S. holder’s adjusted tax basis in those ordinary shares or ADSs, each as determined in
U.S. dollars. Subject to the discussion under “—Passive Foreign Investment Company Considerations”
below, this gain or loss will generally be a capital gain or loss. The adjusted tax basis in our ordinary
shares or ADSs generally will be equal to the U.S dollar cost of such ordinary shares or ADSs. Capital
gain from the sale, exchange or other taxable disposition of our ordinary shares or ADSs by a non-
corporate U.S. holder is generally eligible for a preferential rate of taxation applicable to capital gains, if
the non-corporate U.S. holder’s holding period determined at the time of such sale, exchange or other
taxable disposition for such ordinary shares or ADSs exceeds one year (i.e., such gain is long-term
taxable gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to
limitations. Any such gain or loss that a U.S. holder recognizes generally will be treated as U.S. source
gain or loss for foreign tax credit limitation purposes.
For a cash basis taxpayer, units of foreign currency paid or received are translated into U.S. dollars at the
spot rate on the settlement date of the purchase or sale. In that case, no foreign currency exchange gain or
loss will result from currency fluctuations between the trade date and the settlement date of such a
purchase or sale.
An accrual basis taxpayer, however, may elect the same treatment required of cash basis taxpayers with
respect to purchases and sales of our ordinary shares or ADSs that are traded on an established securities
market, provided the election is applied consistently from year to year. Such election may not be changed
without the consent of the IRS. For an accrual basis taxpayer who does not make such election, units of
foreign currency paid or received are translated into U.S. dollars at the spot rate on the trade date of the
purchase or sale. Such an accrual basis taxpayer may recognize exchange gain or loss based on currency
fluctuations between the trade date and the settlement date. Any foreign currency gain or loss a U.S.
holder realizes will be U.S. source ordinary income or loss.
Passive Foreign Investment Company Considerations. If we are a PFIC in any taxable year, a U.S.
holder will be subject to special rules generally intended to reduce or eliminate any benefits from the
deferral of U.S. federal income tax that a U.S. holder could derive from investing in a non-U.S. company
that does not distribute all of its earnings on a current basis.
We will be a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying
certain look-through rules with respect to the income and assets of our subsidiaries, either: (1) at least
75% of the gross income is “passive income” or (2) at least 50% of the average quarterly value of our
total gross assets (which would generally be measured by fair market value of our assets, and for which
purpose the total value of our assets may be determined in part by the market value of the ADSs and our
ordinary shares, which are subject to change) is attributable to assets that produce “passive income” or are
held for the production of “passive income.”
Passive income for this purpose generally includes dividends, interest, royalties, rents, gains from
commodities and securities transactions, the excess of gains over losses from the disposition of assets
which produce passive income, and includes amounts derived by reason of the temporary investment of
funds raised in offerings of our ordinary shares or ADSs. If a non-U.S. corporation owns directly or
indirectly at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated for
purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as
receiving directly its proportionate share of the other corporation’s income. The determination of whether
we are a PFIC is a fact-intensive determination made on an annual basis and the applicable law is subject
to varying interpretation. If we are a PFIC in any taxable year during which a U.S. holder owns our
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ordinary shares or ADSs, such U.S. holder will be subject to special tax rules discussed below and could
suffer adverse tax consequences.
The market value of our assets may be determined in large part by reference to the market price of the
ADSs and our ordinary shares. Therefore, fluctuations in the market price of our ordinary shares or ADSs
may result in our being a PFIC for any taxable year. Whether we are a PFIC for any taxable year will
depend on income, assets, activities and market capitalization in each year, and because this is a factual
determination made annually after the end of each taxable year, there can be no assurance that we will not
be a PFIC in any taxable year. We do not believe we were characterized as a PFIC in our taxable year
ended December 31, 2020. However, there can be no assurance that we will not be a PFIC in the current
year or for any future taxable year. Our U.S. counsel expresses no opinion regarding our conclusions or
our expectations regarding our PFIC status.
If we are a PFIC in any year with respect to which a U.S. holder owns our ordinary shares or ADSs, we
will continue to be treated as a PFIC with respect to such U.S. holder in all succeeding years during which
the U.S. holder owns the ordinary shares or ADSs, regardless of whether we continue to meet the tests
described above unless we cease to be a PFIC and the U.S. holder has made a “deemed sale” election
under the PFIC rules or is eligible to make and makes a mark-to-market election (as described below),
with respect to all taxable years during such U.S. holder’s holding period in which we are a PFIC. If the
“deemed sale” election is made, a U.S. holder will be deemed to have sold the ordinary shares or ADSs
the U.S. holder holds at their fair market value as of the date of such deemed sale and any gain from such
deemed sale would be subject to the rules described below. After the deemed sale election, so long as we
do not become a PFIC in a subsequent taxable year, the U.S. holder’s ordinary shares or ADSs with
respect to which such election was made will not be treated as shares in a PFIC and the U.S. holder will
not be subject to the rules described below with respect to any “excess distribution” the U.S. holder
receives from us or any gain from an actual sale or other disposition of the ordinary shares or ADSs. U.S.
holders should consult their tax advisors as to the possibility and consequences of making a deemed sale
election if such election becomes available.
If we are a PFIC, and you are a U.S. holder that does not make one of the elections described above (and
below in further detail), a special tax regime will apply to both (a) any “excess distribution” by us to you
(generally, your ratable portion of distributions in any year which are greater than 125% of the average
annual distribution received by you in the shorter of the three preceding years or your holding period for
our ordinary shares or ADSs) and (b) any gain realized on the sale or other disposition of our ordinary
shares or ADSs. Under this regime, any excess distribution and realized gain will be treated as ordinary
income and will be subject to tax as if (a) the excess distribution or gain had been realized ratably over
your holding period for our ordinary shares or ADSs, (b) the amount deemed realized in each year had
been subject to tax in each year of that holding period at the highest marginal rate for such year (other
than income allocated to the current period or any taxable period before we became a PFIC, which would
be subject to tax at the U.S. holder’s regular ordinary income rate for the current year and would not be
subject to the interest charge discussed below), and (c) the interest charge generally applicable to
underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In
addition, dividend distributions made to you will not qualify for the lower rates of taxation applicable to
qualified dividends discussed above under “Distributions.”
Certain elections may alleviate some of the adverse consequences of PFIC status and would result in an
alternative treatment of our ordinary shares or ADSs. If a U.S. holder makes a mark-to-market election,
the U.S. holder generally will recognize as ordinary income any excess of the fair market value of our
ordinary shares or ADSs at the end of each taxable year over their adjusted tax basis, and will recognize
an ordinary loss in respect of any excess of the adjusted tax basis of our ordinary shares or ADSs over
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their fair market value at the end of the taxable year (but only to the extent of the net amount of income
previously included as a result of the mark-to-market election). If a U.S. holder makes the election, the
U.S. holder’s tax basis in our ordinary shares or ADSs will be adjusted to reflect these income or loss
amounts. Any gain recognized on the sale or other disposition of our ordinary shares or ADSs in a year in
which we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss
(but only to the extent of the net amount of income previously included as a result of the mark-to-market
election). The mark-to-market election is available only if we are a PFIC and our ordinary shares or ADSs
are “regularly traded” on a “qualified exchange.” Our ordinary shares or ADSs will be treated as
“regularly traded” in any calendar year in which more than a de minimis quantity of our ordinary shares
or ADSs are traded on a qualified exchange on at least 15 days during each calendar quarter (subject to
the rule that trades that have as one of their principal purposes the meeting of the trading requirement are
disregarded). The Nasdaq Global Select Market is a qualified exchange for this purpose and,
consequently, if the ADSs are regularly traded, the mark-to-market election will be available to a U.S.
holder. It should be noted that only the ADSs and not our ordinary shares are listed on the Nasdaq Global
Select Market. Consequently, our ordinary shares may not be marketable if Euronext Paris (where our
ordinary shares are listed) does not meet the applicable requirements. U.S. holders should consult their tax
advisors regarding the availability of the mark-to-market election for ordinary shares that are not
represented by ADSs.
However, a mark-to-market election generally cannot be made for equity interests in any lower-tier PFICs
that we own, unless shares of such lower-tier PFIC are themselves “marketable.” As a result, even if a
U.S. holder validly makes a mark-to-market election with respect to our ordinary shares or ADSs, the
U.S. holder may continue to be subject to the PFIC rules (described above) with respect to its indirect
interest in any of our investments that are treated as an equity interest in a PFIC for U.S. federal income
tax purposes. U.S. holders should consult their tax advisors as to the availability and desirability of a
mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.
We do not currently intend to provide the information necessary for U.S. holders to make a “qualified
electing fund elections” if we were treated as a PFIC for any taxable year. U.S. holders should consult
their tax advisors to determine whether this election would be available and if so, what the consequences
of the alternative treatments would be in their particular circumstances.
If we were a PFIC, the general tax treatment for U.S. holders described in this section would apply to
indirect distributions and gains deemed to be realized by U.S. holders in respect of any of our subsidiaries
that also may be PFICs. U.S. holders should consult their tax advisors regarding the application of the
PFIC rules to our subsidiaries.
If a U.S. holder owns our ordinary shares or ADSs during any taxable year in which we are a PFIC, the
U.S. holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a
Passive Foreign Investment Company or Qualified Electing Fund) with respect to the company, generally
with the U.S. holder’s federal income tax return for that year. If our company were a PFIC for a given
taxable year, then you should consult your tax advisor concerning your annual filing requirements.
The U.S. federal income tax rules relating to PFICs are complex. Prospective U.S. investors are
urged to consult their own tax advisors with respect to the acquisition, ownership and disposition of
our ordinary shares or ADSs, the consequences to them of an investment in a PFIC, any elections
available with respect to our ordinary shares or ADSs and the IRS information reporting
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obligations with respect to the acquisition, ownership and disposition of our ordinary shares or
ADSs.
Backup Withholding and Information Reporting. U.S. holders generally will be subject to information
reporting requirements with respect to dividends on our ordinary shares or ADSs and on the proceeds
from the sale, exchange or disposition of our ordinary shares or ADSs that are paid within the United
States or through U.S.-related financial intermediaries, unless the U.S. holder is an “exempt recipient.” In
addition, U.S. holders may be subject to backup withholding on such payments, unless the U.S. holder
provides a taxpayer identification number and a duly executed IRS Form W-9 or otherwise establishes an
exemption. Backup withholding is not an additional tax, and the amount of any backup withholding will
be allowed as a credit against a U.S. holder’s U.S. federal income tax liability and may entitle such holder
to a refund, provided that the required information is timely furnished to the IRS.
Foreign Asset Reporting. Certain individual U.S. holders are required to report information relating to an
interest in our ordinary shares or ADSs, subject to certain exceptions (including an exception for shares
held in accounts maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of
Specified Foreign Financial Assets) with their federal income tax return. U.S. holders are urged to consult
their tax advisors regarding their information reporting obligations, if any, with respect to their ownership
and disposition of our ordinary shares or ADSs.
THE DISCUSSION ABOVE IS A SUMMARY OF THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN OUR ORDINARY SHARES OR ADSs AND IS
BASED UPON LAWS AND RELEVANT INTERPRETATIONS THEREOF IN EFFECT AS OF
THE DATE OF THIS ANNUAL REPORT, ALL OF WHICH ARE SUBJECT TO CHANGE,
POSSIBLY WITH RETROACTIVE EFFECT. EACH PROSPECTIVE INVESTOR IS URGED
TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN
INVESTMENT IN OUR ORDINARY SHARES OR ADSs IN LIGHT OF THE INVESTOR’S
OWN CIRCUMSTANCES.
Material French Tax Considerations
The following describes the material French income tax consequences to U.S. holders of purchasing,
owning and disposing of our ADSs.
This discussion does not purport to be a complete analysis or listing of all potential tax effects of the
acquisition, ownership or disposition of our ADSs to any particular investor, and does not discuss tax
considerations that arise from rules of general application or that are generally assumed to be known by
investors. All of the following is subject to change. Such changes could apply retroactively and could
affect the consequences described below.
In 2011, France introduced a comprehensive set of tax rules applicable to French assets that are held by or
in foreign trusts. These rules provide inter alia for the inclusion of trust assets in the settlor’s net assets for
the purpose of applying the former French wealth tax (replaced by the French real estate wealth tax as
from January 1, 2019), for the application of French gift and death duties to French assets held in trust, for
a specific tax on capital on the French assets of foreign trusts not already subject to the former French
wealth tax (replaced by the French real estate wealth tax as from January 1, 2019) and for a number of
French tax reporting and disclosure obligations. The following discussion does not address the French tax
consequences applicable to securities (including ADSs) held in trusts. If ADSs are held in trust, the
grantor, trustee and beneficiary are advised to consult their own tax advisor regarding the specific tax
consequences of acquiring, owning and disposing of such securities.
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The description of the French income tax and real estate wealth tax consequences set forth below is based
on the double tax treaty entered into between the Government of the United States of America and the
Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and Capital of August 31, 1994 (the “Treaty”), which came
into force on December 30, 1995 (as amended by any subsequent protocols, including the protocol of
January 13, 2009), and the tax guidelines issued by the French tax authorities in force as of the date of this
Annual Report, or the Treaty.
This discussion applies only to investors that are entitled to Treaty benefits under the “Limitation on
Benefits” provisions contained in the Treaty.
If a partnership holds ADSs, the tax treatment of the partnership and a partner in such partnership
generally will depend on the status of the partner and the activities of the partnership. Such partner or
partnership is urged to consult its own tax advisor regarding the specific tax consequences of acquiring,
owning and disposing of ADSs.
This discussion applies only to investors that hold ADSs as capital assets that are entitled to Treaty
benefits under the “Limitation on Benefits” provision contained in the Treaty, and whose ownership of
the ADSs is not effectively connected to a permanent establishment or a fixed base in France. Certain
U.S. holders may be subject to special rules not discussed below, and are advised to consult their usual
tax advisor regarding the specific tax consequences which may apply to their particular situation.
U.S. holders are advised to consult their own tax advisor regarding the tax consequences of the purchase,
ownership and disposition of ADSs in light of their particular circumstances, especially with regard to the
“Limitations on Benefits” provision contained in the Treaty.
Tax on Sale or other Disposals
As a matter of principles, under French tax law, a U.S. holder should not be subject to any French tax on
any capital gain from the sale, exchange, repurchase or redemption by us of ordinary shares or ADSs,
provided such U.S. holder is not a French tax resident for French tax purposes and has not held more than
25% of our dividend rights, known as “droits aux benefices sociaux,” at any time during the preceding
five years, either directly or indirectly, and, as relates to individuals, alone or with relatives (as an
exception, a U.S. holder resident, established or incorporated in certain non-cooperative States or
territories as defined in Article 238-0 A of the French tax code (Code général des impôts, the “FTC”)
should be subject to a 75% withholding tax in France on any such capital gain, regardless of the fraction
of the dividend rights it holds unless it provides evidence that the operations to which these profits
correspond have a primary purpose and effect other than enabling their location in such non-cooperative
States or territories).
Under application of the Treaty, a U.S. holder who is a U.S. resident for purposes of the Treaty and
entitled to Treaty benefits will not be subject to French tax on such capital gain unless the ordinary shares
or the ADSs form part of the business property of a permanent establishment or fixed base that the U.S.
holder has in France. U.S. holders who own ordinary shares or ADSs through U.S. partnerships that are
not resident for Treaty purposes are advised to consult their own tax advisor regarding their French tax
treatment and their eligibility for Treaty benefits in light of their own particular circumstances. A U.S.
holder that is not a U.S. resident for Treaty purposes or is not entitled to Treaty benefits (and in both cases
is not resident, established or incorporated in certain non-cooperative States or territories as defined in
Article 238-0 A of the FTC) and has held more than 25% of our dividend rights, known as “droits aux
bénéfices sociaux” at any time during the preceding five years, either directly or indirectly, and, as relates
to individuals, alone or with relatives will be subject to a levy in France (i) at the rate of 12.8% for
individuals, and (ii) a rate corresponding to the standard corporate income tax rate set forth in Article 219-
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I of the FTC for legal persons. Special rules apply to U.S. holders who are residents of more than one
country.
Financial Transactions Tax and Registration Duties
Pursuant to Article 235 ter ZD of the FTC, purchases of shares or ADSs of a French company listed on a
regulated market of the European Union or on a foreign regulated market formally acknowledged by the
AMF are subject to a 0.3% French tax on financial transactions provided that the issuer’s market
capitalization exceeds 1 billion euros as of December 1 of the year preceding the taxation year. A list of
companies whose market capitalization exceeds 1 billion euros as of December 1 of the year preceding
the taxation year, within the meaning of Article 235 ter ZD of the FTC, is published annually by the
French tax authorities in their official guidelines. As at 1 December 2020, our market capitalization did
not exceed 1 billion euros, pursuant to BOI-ANNX-000467-23/12/2020.
Moreover, Nasdaq Global Select Market, on which ADSs are listed, is not currently acknowledged by the
AMF but this may change in the future.
As a consequence, neither the ADSs nor the ordinary shares are currently within the scope of the French
tax on financial transactions.
Purchases of our ADSs may be subject to such tax in the future provided that our market capitalization
exceeds 1 billion euros in the year preceding the taxation year and that the Nasdaq Global Select Market
is acknowledged by the French AMF.
In the case where Article 235 ter ZD of the FTC is not applicable, transfers of shares issued by a French
company which are listed on a regulated or organized market within the meaning of the French monetary
code (Code monétaire et financier) are subject to uncapped registration duties at the rate of 0.1% if the
transfer is evidenced by a written statement (“acte”) executed either in France or outside France. As
ordinary shares of our company are listed on Euronext Paris, which is an organized market within the
meaning of the French monetary code, their transfer should be subject to uncapped registration duties at
the rate of 0.1% subject to the existence of a written statement (“acte”), and provided that Article 235 ter
ZD of the FTC is not applicable. There is however no case law or official guidelines published by the
French tax authorities on this point with respect to transfers of ADSs.
Taxation of Dividends
Dividends paid by a French corporation to non-residents of France are generally subject to French
withholding tax at a rate of (i) 26.5% for fiscal years beginning on or after January 1st, 2021 and 25% for
fiscal years beginning on or after January 1st, 2022, for payment benefiting legal persons which are not
French tax residents, and (ii) 12.8% for payment benefiting individuals who are not French tax residents.
Dividends paid by a French corporation in certain non-cooperative States or territories, as defined in
Article 238-0 A of the FTC, will generally be subject to French withholding tax at a rate of 75%.
However, eligible U.S. holders entitled to Treaty benefits under the “Limitation on Benefits” provision
contained in the Treaty who are U.S. residents, as defined pursuant to the provisions of the Treaty, will
not be subject to this 26.5% (to be decreased to 25% in 2022) or 75% withholding tax rate, but may be
subject to the withholding tax at a reduced rate (as described below).
Under the Treaty, the rate of French withholding tax on dividends paid to an eligible U.S. holder who is a
U.S. resident as defined pursuant to the provisions of the Treaty and whose ownership of the ordinary
shares or ADSs is not effectively connected with a permanent establishment or fixed base that such U.S.
holder has in France, is generally reduced to 15%, or to 5% if such U.S. holder is a corporation and owns
directly or indirectly at least 10% of the share capital of the issuer; such U.S. holder may claim a refund
from the French tax authorities of the amount withheld in excess of the Treaty rates of 15% or 5%, if any.
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For U.S. holders that are not individuals but are U.S. residents, as defined pursuant to the provisions of
the Treaty, the requirements for eligibility for Treaty benefits, including the reduced 5% or 15%
withholding tax rates contained in the “Limitation on Benefits” provision of the Treaty, are complex, and
certain technical changes were made to these requirements by the protocol of January 13, 2009. U.S.
holders are advised to consult their own tax advisor regarding their eligibility for Treaty benefits in light
of their own particular circumstances.
Dividends paid to an eligible U.S. holder may immediately be subject to the reduced rates of 5% or 15%
provided that:
•
•
such holder establishes before the date of payment that it is a U.S. resident under the Treaty by
completing and providing the depositary with a treaty form (Form 5000) in accordance with French
guidelines (BOI-INT-DG-20-20-20-20-12/09/2012 dated September 12, 2012); or
the depositary or other financial institution managing the securities account in the U.S. of such
holder provides the French paying agent with a document listing certain information about the U.S.
holder and its ordinary shares or ADSs and a certificate whereby the financial institution managing
the U.S. holder’s securities account in the United States takes full responsibility for the accuracy of
the information provided in the document.
Otherwise, dividends paid to a U.S. holder, if such U.S. holder is a legal person, will be subject to French
withholding tax at the rate of 26.5% (to be decreased to 25% in 2022), or 75% if paid in certain non-
cooperative States or territories (as defined in Article 238-0 A of the FTC), and then reduced at a later
date to 5% or 15%, provided that such holder duly completes and provides the French tax authorities with
the treaty forms Form 5000 and Form 5001 before December 31 of the second calendar year following
the year during which the dividend is paid. Certain qualifying pension funds and certain other tax-exempt
entities are subject to the same general filing requirements as other U.S. holders except that they may
have to supply additional documentation evidencing their entitlement to these benefits.
Form 5000 and Form 5001, together with instructions, will be provided by the depositary to all U.S.
holders registered with the depositary. The depositary will arrange for the filing with the French tax
authorities of all such forms properly completed and executed by U.S. holders of ordinary shares or ADSs
and returned to the depositary in sufficient time so that they may be filed with the French tax authorities
before the distribution in order to immediately obtain a reduced withholding tax rate. Otherwise, the
depositary must withhold tax at the full rate of 26.5% (to be decreased to 25% in 2022) or 75% as
applicable. In that case, the U.S. holders may claim a refund from the French tax authorities of the excess
withholding tax.
In any case, individual taxpayers who are not fiscally domiciled in France should not have to comply with
these procedures if the French withholding tax applying to them is lower than 15%.
Estate and Gift Taxes
In general, a transfer of securities by gift or by reason of death of a U.S. holder that would otherwise be
subject to French gift or inheritance tax, respectively, will not be subject to such French tax by reason of
the double tax treaty entered into between the Government of the United States of America and the
Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Estates, Inheritances and Gifts, dated November 24, 1978, unless (i) the
donor or the transferor is domiciled in France at the time of making the gift or at the time of his or her
death, or (ii) the ADSs were used in, or held for use in, the conduct of a business through a permanent
establishment or a fixed base in France.
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Wealth Tax
As from January 1, 2019, the French wealth tax (impôt de solidarité sur la fortune) is repealed and
replaced by the French real estate wealth tax (impôt sur la fortune immobilière). The scope of such new
tax is narrowed to French real estate assets (and certain assets deemed to be real estate assets) or rights,
held directly or indirectly through one or more legal entities and whose net taxable assets amount at least
to €1,300,000.
Broadly, subject to provisions of double tax treaties and to certain exceptions, individuals who are not
residents of France for tax purposes within the meaning of Article 4 B of the FTC, are subject to real
estate wealth tax (impôt sur la fortune immobilière) in France in respect of the portion of the value of
their shares of our company representing real estate assets (Article 965, 2° of the FTC). Some exceptions
are provided by the FTC. For instance, any participations representing less than 10% of the share capital
of an operational company and shares representing real estate for the professional use of the company
considered shall not fall within the scope of the French real estate wealth tax (impôt sur la fortune
immobilière).
Under the Treaty (the provisions of which should be applicable to this new real estate wealth tax (impôt
sur la fortune immobilière) in France), the French real estate wealth tax (impôt sur la fortune
immobilière) will however generally not apply to securities held by an eligible U.S. holder who is a U.S.
resident, as defined pursuant to the provisions of the Treaty, provided that such U.S. holder (i) does not
own directly or indirectly more than 25% of the issuer’s financial rights and (ii) that the ADSs do not
form part of the business property of a permanent establishment or fixed base in France.
U.S. holders are advised to consult their own tax advisor regarding the specific tax consequences which
may apply to their particular situation with respect to such French real estate wealth tax (impôt sur la
fortune immobilière).
F. Dividends and Paying Agents.
Not applicable.
G. Statement by Experts.
Not applicable.
H. Documents on Display.
We are subject to the information reporting requirements of the Exchange Act applicable to foreign
private issuers and under those requirements will file reports with the SEC. Those reports may be
inspected without charge at the locations described below. As a foreign private issuer, we are exempt
from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our
officers, directors and principal shareholders are exempt from the reporting and short-swing profit
recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under
the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as
promptly as United States companies whose securities are registered under the Exchange Act.
Nevertheless, we will file with the SEC an Annual Report on Form 20-F containing financial statements
that have been examined and reported on, with an opinion expressed by an independent registered public
accounting firm.
We maintain a corporate website at www.innate-pharma.com. We intend to post our Annual Report on
Form 20-F on our website promptly following it being filed with the SEC. Information contained on, or
that can be accessed through, our website does not constitute a part of this Annual Report. We have
included our website address in this Annual Report solely as an inactive textual reference.
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The Securities and Exchange Commission maintains a website (www.sec.gov) that contains reports, proxy
and information statements and other information regarding registrants, such as us, that file electronically
with the SEC.
With respect to references made in this Annual Report to any contract or other document of our company,
such references are not necessarily complete and you should refer to the exhibits attached or incorporated
by reference to this Annual Report for copies of the actual contract or document.
I. Subsidiary Information.
Not required.
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
Our activities are exposed to liquidity risk, foreign currency exchange risk, interest rate risk and credit
risk.
Liquidity risk
We do not believe that we are exposed to short-term liquidity risk, considering our cash and cash
equivalents and short-term investments of €151.6 million as of December 31, 2020, which consist
primarily of cash and money market funds and term deposits that are convertible into cash immediately
without penalty.
Foreign currency exchange rate risk
We are exposed to foreign exchange risk inherent in certain subcontracting activities related to our
operations in the United States, which are invoiced in U.S. dollars. We do not currently have material
recurring revenues in euro, dollars or in any other currency. As we further increase our business,
particularly in the United States, we expect to face greater exposure to exchange rate risk.
Our revenue denominated in U.S. dollars has represented approximately 100%, 100% and 88% of
revenue in the years ended December 31, 2018, 2019 and 2020. Our payments in U.S. dollars represented
approximately 31.9%,64.1% and 48.4% of our payments in the years ended December 31, 2018, 2019
and 2020, respectively. In order to cover this foreign currency exchange rate risk, we kept in U.S. dollars
a part of the consideration received from AstraZeneca in June 2015 and January 2019. We kept the entire
U.S dollars portion of the proceeds received from our October 2019 global offering in U.S dollars. We do
not use hedging instruments.
Interest rate risk
We have limited exposure to interest rate risk. Our exposure primarily relates to money market funds and
time deposit accounts. Changes in interest rates have a direct impact on the rate of return on these
investments and the cash flows generated. We do not have any credit facilities bearing variable interest
rates. The repayment of the advances from BPI France and the borrowings subscribed in 2017 are not
subject to interest rate risk. The effect of an increase or decrease in interest rates would have an
immaterial effect on profit or loss.
Credit risk
The credit risk related to our cash equivalents, short-term investments and non-current financial assets is
not significant in light of the quality of the issuers. We deemed that no instrument of its portfolio is
exposed to credit risk.
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Item 12. Description of Securities Other than Equity Securities.
A. Debt Securities.
Not applicable.
B. Warrants and Rights.
Not applicable.
C. Other Securities.
Not applicable.
D. American Depositary Shares.
Citibank, N.A. acts as the depositary bank for the ADSs. Citibank’s depositary offices are located at 388
Greenwich Street, New York, New York 10013. ADSs represent ownership interests in securities that are
on deposit with the depositary bank. ADSs may be represented by certificates that are commonly known
as American Depositary Receipts, or ADRs. The depositary bank typically appoints a custodian to
safekeep the securities on deposit. In this case, the custodian is Citibank Europe plc, 1 North Wall Quay,
Dublin 1, Ireland.
We have appointed Citibank, N.A. as depositary bank pursuant to a deposit agreement. A copy of the
deposit agreement has been filed with the SEC under cover of a Registration Statement on Form F-6
(Registration No. 333-234063). You may obtain a copy of the deposit agreement from the SEC’s website
at www.sec.gov.
Each ADS represents the right to receive, and to exercise the beneficial ownership interests in, one
ordinary share that is on deposit with the depositary bank and/or custodian. An ADS also represents the
right to receive, and to exercise the beneficial interests in, any other property received by the depositary
bank or the custodian on behalf of the owner of the ADS but that has not been distributed to the owners of
ADSs because of legal restrictions or practical considerations. We and the depositary bank may agree to
change the ADS-to-Share ratio by amending the deposit agreement. This amendment may give rise to, or
change, the depositary fees payable by ADS owners. The custodian, the depositary bank and their
respective nominees will hold all deposited property for the benefit of the holders and beneficial owners
of ADSs. The deposited property does not constitute the proprietary assets of the depositary bank, the
custodian or their nominees. Beneficial ownership in the deposited property will under the terms of the
deposit agreement be vested in the beneficial owners of the ADSs. The depositary bank, the custodian and
their respective nominees are the record holders of the deposited property represented by the ADSs for the
benefit of the holders and beneficial owners of the corresponding ADSs. A beneficial owner of ADSs
may or may not be the holder of ADSs. Beneficial owners of ADSs are able to receive, and to exercise
beneficial ownership interests in, the deposited property only through the registered holders of the ADSs,
the registered holders of the ADSs (on behalf of the applicable ADS owners) only through the depositary
bank, and the depositary bank (on behalf of the owners of the corresponding ADSs) directly, or indirectly,
through the custodian or their respective nominees, in each case upon the terms of the deposit agreement.
If you are or become an owner of ADSs, you are or will become a party to the deposit agreement and
therefore are or will be bound to its terms and to the terms of any ADR that represents your ADSs. The
deposit agreement and the ADR specify our rights and obligations as well as your rights and obligations
as owner of ADSs and those of the depositary bank. As an ADS holder you appoint the depositary bank to
act on your behalf in certain circumstances. The deposit agreement and the ADRs are governed by New
York law. However, our obligations to the holders of ordinary shares will continue to be governed by the
laws of France, which may be different from the laws in the United States.
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In addition, applicable laws and regulations may require you to satisfy reporting requirements and obtain
regulatory approvals in certain circumstances. You are solely responsible for complying with such
reporting requirements and obtaining such approvals. Neither the depositary bank, the custodian, us or
any of their or our respective agents or affiliates shall be required to take any actions whatsoever on your
behalf to satisfy such reporting requirements or obtain such regulatory approvals under applicable laws
and regulations.
Fees and Expenses
Pursuant to the terms of the amended and restated deposit agreement, the holders of our ADSs are
required to pay the following fees to the depositary bank:
Service
Issuance of ADSs (e.g., an issuance of ADS upon a
deposit of ordinary shares, upon a change in the ADSs-
to-ordinary shares ratio, or for any other reason),
excluding ADS issuances as a result of distributions of
ordinary shares)
Fees
Up to U.S. 5¢ per ADS issued
Cancellation of ADSs (e.g., a cancellation of ADSs for
delivery of deposited property, upon a change in the
ADSs-to ordinary shares ratio, or for any other reason)
Up to U.S. 5¢ per ADS cancelled
Distribution of cash dividends or other cash
distributions (e.g., upon a sale of rights and other
entitlements)
Up to U.S. 5¢ per ADS held
Distribution of ADSs pursuant to (i) stock dividends or
other free stock distributions, or (ii) exercise of rights to
purchase additional ADSs
Up to U.S. 5¢ per ADS held
Distribution of securities other than ADSs or rights to
purchase additional ADSs (e.g., upon a spin-off)
Up to U.S. 5¢ per ADS held
ADS Services
Registration of ADS transfers (e.g., upon a
registration of the transfer of registered ownership
of ADSs, upon a transfer of ADSs into DTC and
vice versa, or for any other reason)
Conversion of ADSs of one series for ADSs of
another series (e.g., upon conversion of Partial
Entitlement ADSs for Full Entitlement ADSs, or
upon conversion of Restricted ADSs (each as
defined in the Deposit Agreement) into freely
transferable ADSs, and vice versa).
Up to U.S. 5¢ per ADS held on the applicable record
date(s) established by the depositary bank
Up to U.S. 5¢ per ADS (or fraction thereof) transferred
Up to U.S. 5¢ per ADS (or fraction thereof) converted
213
ADS holders are responsible to pay certain charges such as:
•
•
•
•
•
•
taxes (including applicable interest and penalties) and other governmental charges;
the registration fees as may from time to time be in effect for the registration of ordinary shares on
the share register and applicable to transfers of ordinary shares to or from the name of the
custodian, the depositary bank or any nominees upon the making of deposits and withdrawals,
respectively;
certain cable, telex and facsimile transmission and delivery expenses;
the fees, expenses, spreads, taxes and other charges of the depositary bank and/or service providers
(which may be a division, branch or affiliate of the depositary bank) in the conversion of foreign
currency;
the reasonable and customary out-of-pocket expenses incurred by the depositary bank in connection
with compliance with exchange control regulations and other regulatory requirements applicable to
ordinary shares, ADSs and ADRs; and
the fees, charges, costs and expenses incurred by the depositary bank, the custodian, or any
nominee in connection with the ADR program.
ADS fees and charges for (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the
person for whom the ADSs are issued (in the case of ADS issuances) and to the person for whom ADSs
are cancelled (in the case of ADS cancellations). In the case of ADSs issued by the depositary bank into
DTC, the ADS issuance and cancellation fees and charges may be deducted from distributions made
through DTC, and may be charged to the DTC participant(s) receiving the ADSs being issued or the DTC
participant(s) holding the ADSs being cancelled, as the case may be, on behalf of the beneficial owner(s)
and will be charged by the DTC participant(s) to the account of the applicable beneficial owner(s) in
accordance with the procedures and practices of the DTC participants as in effect at the time. ADS fees
and charges in respect of distributions and the ADS service fee are charged to the holders as of the
applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees
and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash
and (ii) the ADS service fee, holders as of the ADS record date will be invoiced for the amount of the
ADS fees and charges and such ADS fees and charges may be deducted from distributions made to
holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions other than
cash and the ADS service fee may be deducted from distributions made through DTC, and may be
charged to the DTC participants in accordance with the procedures and practices prescribed by DTC and
the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for
whom they hold ADSs. In the case of (i) registration of ADS transfers, the ADS transfer fee will be
payable by the ADS Holder whose ADSs are being transferred or by the person to whom the ADSs are
transferred, and (ii) conversion of ADSs of one series for ADSs of another series, the ADS conversion fee
will be payable by the Holder whose ADSs are converted or by the person to whom the converted ADSs
are delivered.
In the event of refusal to pay the depositary bank fees, the depositary bank may, under the terms of the
deposit agreement, refuse the requested service until payment is received or may set off the amount of the
depositary bank fees from any distribution to be made to the ADS holder. Note that the fees and charges
you may be required to pay may vary over time and may be changed by us and by the depositary bank.
You will receive prior notice of such changes. The depositary bank may reimburse us for certain expenses
incurred by us in respect of the ADR program, by making available a portion of the ADS fees charged in
214
respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank
agree from time to time.
Payment of Taxes
ADS holders are responsible for the taxes and other governmental charges payable on the ADSs and the
securities represented by the ADSs. We, the depositary bank and the custodian may deduct from any
distribution the taxes and governmental charges payable by holders and may sell any and all property on
deposit to pay the taxes and governmental charges payable by holders. You are be liable for any
deficiency if the sale proceeds do not cover the taxes that are due.
The depositary bank may refuse to issue ADSs, to deliver, transfer, split and combine ADRs or to release
securities on deposit until all taxes and charges are paid by the applicable holder. The depositary bank and
the custodian may take reasonable administrative actions to obtain tax refunds and reduced tax
withholding for any distributions on your behalf. However, you may be required to provide to the
depositary bank and to the custodian proof of taxpayer status and residence and such other information as
the depositary bank and the custodian may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any claims with respect to taxes based on any tax
benefit obtained for you.
Depositary Payments for 2020
From time to time, the depositary bank may make payments to us to reimburse and/or share revenue from
the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating
to costs and expenses arising out of establishment and maintenance of the ADS program. In performing
its duties under the deposit agreement, the depositary bank may use brokers, dealers or other service
providers that are affiliates of the depositary bank and that may earn or share fees or commissions. For the
year ended December 31, 2020, Citibank, N.A., as depositary bank, had made reimbursements to us of
€700.7 million ($772.8 million).
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
October 2019 Global Offering
In October 2019, we completed a global offering of an aggregate of 14,375,000 ordinary shares, including
the full exercise of the underwriters’ option to purchase 1,875,000 additional ordinary shares. The
October 2019 global offering consisted of a U.S. initial public offering of 8,047,227 ordinary shares in the
form of American Depositary Shares, each representing one ordinary share, at an offering price of $5.50
per ADS and a concurrent private placement in Europe and other countries outside of the United States
and Canada of 4,452,773 ordinary shares at an offering price of €4.97 per ordinary share for aggregate
gross proceeds to us of approximately $79.1 million (€71.4 million). The net proceeds to us, after
deducting underwriting discounts and commissions and offering expenses, were approximately €66.0
million. The offering commenced on October 17, 2019 and did not terminate before all of the securities
registered in the registration statement were sold. The effective date of the registration statement, File No.
333-233865, for our October 2019 global offering was October 16, 2019.
215
Citigroup Global Markets Inc., SVB Leerink LLC and Evercore Group L.L.C. acted as representatives of
the underwriters in the U.S. offering. Citigroup Global Markets Limited acted as a representative in the
European private placement.
The net proceeds from our October 2019 global offering have been used, and are expected to continue to
be used, as described in the final prospectus for the October 2019 global offering filed with the U.S.
Securities and Exchange Commission on October 16, 2019.
None of the net proceeds of our October 2019 global offering were paid directly or indirectly to any
director, officer, general partner of ours or to their associates, persons owning ten percent or more of any
class of our equity securities, or to any of our affiliates.
Item 15. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer (principal executive officer) and
our chief financial officer (principal financial officer), has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13(a) - 15(e) and 15(d) - 15(e) under the
Securities Exchange Act of 1934, as amended), as of December 31, 2020. Based on such evaluation, our
principal executive officer and principal financial officer have concluded that our disclosure controls and
procedures were not effective at the reasonable assurance level as of December 31, 2020 as a result of the
material weaknesses described below. We are undertaking the remedial steps to address the material
weakness in our disclosure controls and procedures as discussed under “Item 15. Controls and Procedures
—Management’s Plan for Remediation.”.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and for the assessment of
the effectiveness of our internal control over financial reporting. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Under the supervision and with the participation of our chief executive officer (principal executive
officer) and chief financial officer (principal financial officer), management conducted an assessment of
our internal control over financial reporting based upon the framework in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of our financial
statements will not be prevented or detected on a timely basis.
In connection with this assessment, our management identified the following material weakness in our
internal control over financing reporting as of December 31, 2020:
We identified a material weakness in the financial reporting process relating to journal entries and
significant unusual and complex transactions due to controls over payments which were implemented too
late in the year, segregation of duties in the journal entry review process which was not sufficiently
implemented, controls over completeness and accuracy of data used in complex calculations which were
not operating effectively, in particular in the monalizumab revenue calculation, and controls over
significant and complex transactions which were not operating at a sufficient level of precision due to
216
insufficient personnel with an appropriate level of knowledge and training in internal control over the
complex transactions.
As a result of the material weakness described above, management concluded our internal control over
financial reporting was not effective at the reasonable assurance level as of December 31, 2020.
Remediation of Previously Identified Material Weakness in Internal Control over Financial
Reporting
Management previously identified three material weaknesses in our internal control over financial
reporting that were identified in connection with the preparation of our financial results for the year ended
December 31, 2019. As a result of the remediation activities described below, as of December 31, 2020,
management has concluded that two of the three previously disclosed material weaknesses have been
remediated.
The material weaknesses previously identified in our internal control over financial reporting related to:
1.
2.
the accounting for subcontracting clinical costs for which there was insufficient control on the
input data coming from clinical studies and used in assessing their advancement;
the recognition of the revenue from our collaboration and licensing agreement with AstraZeneca
on monalizumab for which there was insufficient review of the calculation of the transaction price
and percentage of completion of costs incurred; and
3. our information system, supporting the production of our financial information, also resulted in
deficiencies in terms of "general IT controls" (GITC) related to the management of access rights,
including segregation of duties and change management.
In response to the identified material weaknesses, we took a number of actions to improve our internal
control over financial reporting during the year ended December 31, 2020, including the following:
• We implemented a new Enterprise resource Planning, or ERP, on August 1, 2020. We designed
and implemented GITC, in particular over the management of access rights, segregation of duties
and change management; and
• We modified the accounting process for clinical subcontracting costs. We designed and
implemented controls over this process, in particular over input data coming from clinical studies
and their advancement.
The material weakness related to revenue was not fully remediated and contributed to the material
weakness for the year ended December 31, 2020 as described above.
Management’s Plan for Remediation of Current Material Weakness
With the oversight of senior management and our audit committee, we continue to evaluate our internal
control over financial reporting and are taking several remedial actions to address the material weakness
that has been identified, including:
•
•
Improving segregation of duties,
Implementing improved controls over payments;
• Verifying the accuracy and completeness of source data used to calculate the revenue; and
• Hiring additional accounting and finance personnel, identifying the complex or unusual nature of
certain transactions and consulting with appropriate internal or external specialists for complex
accounting treatments.
217
Notwithstanding such material weakness, our management has concluded that the financial statements
included elsewhere in this Annual Report present fairly, in all material respects, our financial position,
results of operations and cash flows for the periods presented in conformity with IFRS.
If we fail to fully remediate the material weakness or fail to maintain effective internal controls in the
future, it could result in a material misstatement of our financial statements that would not be prevented or
detected on a timely basis, which could cause investors to lose confidence in our financial information or
cause our stock price to decline. Our independent registered public accounting firm has not assessed the
effectiveness of our internal control over financial reporting, which may increase the risk that weaknesses
or deficiencies in our internal control over financial reporting go undetected.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our registered public accounting firm due to
a transition period established by rules of the Securities and Exchange Commission for emerging growth
companies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the year ended December
31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting
Item 16. Reserved.
Not applicable.
Item 16A. Audit Committees Financial Expert.
Our Supervisory board has determined that Dr. Langlois is an audit committee financial expert as defined
by SEC rules and regulations and each of the members of our board of directors has the requisite financial
sophistication under the applicable rules and regulations of the Nasdaq Stock Market. Dr. Langlois and
Dr. Staatz-Granzer are independent as such term is defined in Rule 10A-3 under the Exchange Act and
under the listing standards of the Nasdaq Stock Market.
Item 16B. Code of Business Conduct and Ethics.
We have adopted a Code of Business Conduct and Ethics, or the Code of Ethics, that is applicable to all
of our employees, executive officers and directors. A copy of the Code of Ethics is available on our
website at www. investors.innate-pharma.com. The audit committee of our Supervisory board is
responsible for overseeing the Code of Ethics and must approve any waivers of the Code of Ethics for
employees, executive officers and directors. We expect that any amendments to the Code of Ethics, or
any waivers of its requirements, will be disclosed on our website.
Item 16C. Principal Accountant Fees and Services.
Deloitte & Associés, has served as our independent registered public accounting firm for 2019 and 2020.
Our accountants billed the following fees to us for professional services in each of those fiscal years, all
of which were approved by our audit committee:
218
(in thousands of euro)
Audit fees
Non-audit fees
Total
Year ended December 31,
2019
2020
Deloitte &
Associés
Total
Deloitte &
Associés
Total
1,190
2
1,192
1,190
2
1,192
684 684
115 115
799 799
684
115
799
“Audit fees” are the aggregate fees billed for the audit of our annual financial statements. This category
also includes services that Deloittes & Associés provides, such as consents and assistance with and review
of documents filed with the SEC.
“Non-audit fees” are the aggregate fees billed for services related to the production of certification in the
context of the declaration of expenses for the obtention of grants and the preparation of special reports
relating to certain operations on the Company’s capital.
Audit and Non-Audit Services Pre-Approval Policy
The audit committee has responsibility for appointing, setting compensation of and overseeing the work
of the independent registered public accounting firm. In recognition of this responsibility, the audit
committee has adopted a policy governing the pre-approval of all audit and permitted non-audit services
performed by our independent registered public accounting firm to ensure that the provision of such
services does not impair the independent registered public accounting firm’s independence from us and
our management. Unless a type of service to be provided by our independent registered public accounting
firm has received general pre-approval from the audit committee, it requires specific pre-approval by the
audit committee. The payment for any proposed services in excess of pre-approved cost levels requires
specific pre-approval by the audit committee.
Pursuant to its pre-approval policy, the audit committee may delegate its authority to pre-approve services
to the chairperson of the audit committee. The decisions of the chairperson to grant pre-approvals must be
presented to the full audit committee at its next scheduled meeting. The audit committee may not delegate
its responsibilities to pre-approve services to the management.
The audit committee has considered the non-audit services provided by Deloitte & Associés as described
above and believes that they are compatible with maintaining Deloitte & Associés’s independence as our
independent registered public accounting firm.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Not applicable.
Item 16F. Change in Registrant’s Certifying Accountant.
Not applicable.
Item 16G. Corporate Governance.
As a French société anonyme, we are subject to various corporate governance requirements under French
law. We are a “foreign private issuer” under the U.S. federal securities laws and the Nasdaq listing rules.
219
The foreign private issuer exemption will permit us to follow home country corporate governance
practices instead of certain Nasdaq listing requirements. A foreign private issuer that elects to follow a
home country practice instead of Nasdaq listing requirements must submit to Nasdaq a written statement
from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not
prohibited by the home country’s laws.
We apply the AFEP/MEDEF code, which recommends that a majority of the members of the Supervisory
Board be independent (as such term is defined under the code). Neither the corporate laws of France nor
our bylaws requires that (i) each committee of the Supervisory Board have a formal written charter or
(iii) our independent members of the Supervisory Board hold regularly scheduled meetings at which only
independent members of the Supervisory Board are present. We intend to follow French corporate
governance practices in lieu of Nasdaq listing requirements for each of the foregoing.
These exemptions do not modify the independence requirements for the audit committee, since September
2020, we comply with the requirements of the Sarbanes-Oxley Act and the Nasdaq listing rules, which
require that our audit committee be composed of at least three independent members. Rule 10A-3 under
the Exchange Act provides that the audit committee must have direct responsibility for the nomination,
compensation and choice of our auditors, as well as control over the performance of their duties,
management of complaints made, and selection of consultants. Under Rule 10A-3, if the laws of a foreign
private issuer’s home country require that any such matter be approved by the board of directors or the
shareholders of the Company, the audit committee’s responsibilities or powers with respect to such matter
may instead be advisory. Under French law, the audit committee may only have an advisory role and
appointment of our statutory auditors, in particular, must be decided by our shareholders at our annual
meeting.
In addition, Nasdaq rules require that a listed company specify that the quorum for any meeting of the
holders of share capital be at least 33 1/3% of the outstanding shares of the company’s ordinary voting
shares. We intend to follow our French home country practice, rather than complying with this Nasdaq
rule. Consistent with French Law, our bylaws provide that when first convened, general meetings of
shareholders may validly convene only if the shareholders present or represented hold at least (1) 20% of
the voting shares in the case of an ordinary general meeting or of an extraordinary general meeting where
shareholders are voting on a capital increase by capitalization of reserves, profits or share premium, or (2)
25% of the voting shares in the case of any other extraordinary general meeting. If such quorum required
by French law is not met, the meeting is adjourned. There is no quorum requirement under French law
when an ordinary general meeting or an extraordinary general meeting is reconvened where shareholders
are voting on a capital increase by capitalization of reserves, profits or share premium, but the reconvened
meeting may consider only questions that were on the agenda of the adjourned meeting. When any other
extraordinary general meeting is reconvened, the required quorum under French law is 20% of the shares
entitled to vote. If a quorum is not met at a reconvened meeting requiring a quorum, then the meeting may
be adjourned for a maximum of two months.
Item 16H. Mine Safety Disclosure.
Not applicable.
Item 17. Financial Statements.
PART III
See the financial statements beginning on page F-l of this Annual Report.
220
Item 18. Financial Statements.
Not applicable.
Item 19. Exhibits.
The exhibits listed below are filed as exhibits to this Annual Report.
The following exhibits are filed as part of this Annual Report:
Exhibit
Number
1.1*
2.1
2.2
4.1†
4.2†
4.3†
4.4†
4.5†
4.6†
8.1
12.1*
12.2*
13.1**
Description of Exhibit
Schedule/
Form
File Number Exhibit
File Date
F-1 333-233865
4.1
10/04/19
F-1 333-233865
4.2
10/04/19
F-1 333-233865
10.1
09/20/19
F-1 333-233865
10.2
09/20/19
F-1 333-233865
10.3
09/20/19
F-1 333-233865
10.4
09/20/19
F-1 333-233865
10.5
09/20/19
F-1 333-233865
10.6
09/20/19
F-1 333-233865
21.1
09/20/19
By-laws (status) of the registrant (English
translation)
Form of Deposit Agreement
Form of American Depositary Receipt (included in
Exhibit 2.1)
Co-Development and License Agreement between
Innate Pharma S.A. and MedImmune Limited,
dated April 24, 2015, as amended to date.
Lumoxiti License Agreement, between Innate
Pharma S.A. and MedImmune Limited, dated
October 22, 2018.
Amendment and Restatement Agreement of the
Collaboration and Option Agreement Relating to
CD39, between Innate Pharma S.A. and
MedImmune Limited, dated April 16, 2019.
Joint Research, Development, Option and License
Agreement between Innate Pharma S.A. and Novo
Nordisk A/S, dated March 28, 2006, as amended to
date.
Finance Lease Agreement between Innate Pharma
S.A. and Sogebail S.A., dated June 9, 2008
(English translation).
Amendment to Finance Lease Agreement between
Innate Pharma S.A. and Sogebail S.A., dated
September 29, 2016 (English translation).
List of subsidiaries of the registrant
Certificate of Principal Executive Officer pursuant
to Securities Exchange Act Rules 13a-14(a) and
15d-14(a) as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification by the Principal Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a) and 15d-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Certification by the Principal Executive Officer and
the Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
221
Exhibit
Number
15.1
Description of Exhibit
Consent of Deloitte & Associés
Schedule/
Form
File Number Exhibit
File Date
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase
Document
101.LAB* XBRL Taxonomy Extension Label Linkbase
Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
Document
*
Filed herewith.
** Furnished herewith.
† Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm to the registrant
if disclosed
222
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
Innate Pharma S.A.
By: /s/ Mondher Mahjoubi, M.D.
Name: Mondher Mahjoubi, M.D.
Title: Chief Executive Officer
Date: April 27, 2021
223
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements as of and for the Years Ended December 31, 2018, 2019 and 2020
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position as of December 31, 2018, 2019 and 2020
Consolidated Statements of Income (Loss) for the Years Ended December 31, 2018, 2019 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018, 2019 and
2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2019 and 2020
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2018, 2019 and
2020
Notes to the Consolidated Financial Statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Innate Pharma
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Innate Pharma S.A.
and subsidiaries (the "Company") as of December 31, 2020, 2019 and 2018, the related consolidated
statements of income (loss), comprehensive income (loss), cash flows and changes in shareholders'
equity, for each of the three years in the period ended December 31, 2020, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2020, 2019 and
2018, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2020, in conformity with International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB).
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Associés
Paris La Défense, France
April 26, 2021
We have served as the Company's auditor since 2014.
F-2
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(amounts in thousands of euro)
Year Ended December 31,
Note
2018
2019(1)
2020
ASSETS
Non-current assets
Intangible assets
Property and equipment
Non-current financial assets
Other non-current assets
Trade receivables and others - non-current
Deferred tax assets
Total non-current assets
Current assets
Cash and cash equivalents
Short-term investments
Trade receivables and others - current
Total current assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Share capital
Share premium
Retained earnings
Other reserves
Net income (loss)
Total shareholders’ equity
Non-current liabilities
Collaboration liabilities – non-current portion
Financial liabilities – non-current portion
Defined benefit obligations
Deferred revenue – non-current portion
Provisions – non-current portion
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Trade payables and others
Collaboration liabilities – current portion
Financial liabilities – current portion
Deferred revenue – current portion
Provisions – current portion
Total current liabilities
6
7
4
5
17
4
4
5
11
11
13
9
10
13
18
17
8
13
9
13
18
84,529
10,216
35,181
86
—
1,561
131,574
152,314
15,217
152,112
319,643
451,216
96,968
11,672
37,005
89
16,737
1,286
163,756
202,887
15,978
18,740
237,605
401,361
46,289
11,694
38,934
147
29,821
7,087
133,972
136,792
14,845
21,814
173,451
307,423
3,197
299,932
(137,840)
(1,099)
3,049
167,240
3,941
369,617
(134,912)
(472)
(20,759)
217,416
3,950
372,131
(156,476)
355
(63,984)
155,976
10,669
3,175
3,697
68,098
38
1,561
87,238
91,655
20,987
1,347
82,096
652
196,737
—
16,593
3,760
40,342
142
1,286
62,123
49,504
21,304
2,130
48,770
114
121,822
44,854
16,945
4,177
32,674
221
7,087
105,959
29,539
1,832
2,142
11,299
676
45,488
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
451,216
401,361
307,423
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f for
more details on the impact of the transition.
F-3
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(amounts in thousands of euro, except share and per share data)
Year ended December 31,
Note
2018
2019(1)
2020
Revenue and other income
Revenue from collaboration and licensing agreements
Government financing for research expenditures
Sales
Total revenue and other income
Operating expenses
Research and development expenses
Selling, general and administrative expenses
Impairment of intangible assets
Total operating expenses
Net income (loss) from distribution agreements
Operating income (loss)
Financial income
Financial expenses
Net financial income (loss)
Net income (loss) before tax
Income tax expense
Net income (loss)
Basic income (loss) per share (€/share)
Diluted income (loss) per share (€/share)
13
13
14
14
6
15
16
16
17
20
20
79,892
68,974
14,060
16,840
—
—
56,155
13,618
678
93,952
85,814
70,451
(69,555)
(78,844)
(58,613)
(18,142)
(25,803)
(31,246)
—
—
(43,529)
(87,697)
(104,647)
(133,388)
(1,109)
(8,219)
861
5,146
(27,052)
(62,076)
6,002
11,269
4,855
(8,429)
(4,976)
(2,427)
6,293
(6,763)
(1,908)
2,718
(20,759)
(63,984)
333
—
—
3,049
(20,759)
(63,984)
0.05
0.05
(0.31)
(0.31)
(0.81)
(0.81)
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f for
more details on the impact of the transition."
F-4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands of euro)
(In thousands of euro)
Year Ended December 31,
Net income (loss) for the period
Elements which will be reclassified in the consolidated
statement of income (loss):
Change in fair value of short-term investments and non-
current financial assets
Foreign currency translation gain (loss)
Items which will not be reclassified in the consolidated
statement of income (loss):
Actuarial gains and (losses) related to defined benefit
obligations
Other comprehensive income (loss)
Total comprehensive income (loss)
Note
2018
2019(1)
3,049
(20,759)
2020
(63,984)
4
—
(26)
—
5
—
222
10
(599)
(625)
2,424
622
627
(20,132)
(200)
22
(63,962)
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f for
more details on the impact of the transition.
F-5
CONSOLIDATED STATEMENT OF CASH FLOWS
(amounts in thousands of euro)
Net income (loss)
Reconciliation of the net income (loss) and the cash
generated from (used for) the operating activities
Depreciation and amortization, net
Employee benefits costs
Provisions for charges
Share-based compensation expense
Change in fair value of financial assets
Foreign exchange (gains) losses on financial assets
Change in accrued interests on financial assets
Gains (losses) on assets and other financial assets
Interest paid
Other profit or loss items with no cash effect
Operating cash flow before change in working capital
Change in working capital
Net cash generated from / (used in) operating activities
Acquisition of intangible assets
Acquisition of property and equipment, net
Purchase of non-current financial instruments
Disposal of property and equipment
Disposal of other assets
Acquisition of other assets
Disposal of current financial instruments
Disposal of non-current financial instruments
Interest received on financial assets
Net cash generated from / (used in) investing activities
Proceeds from
instruments
Increase in capital, net
Proceeds from borrowings
Repayment of borrowings
Net interest paid
Net cash generated from / (used in) financing activities
Effect of the exchange rate changes
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
/ subscription of equity
the exercise
Year Ended December 31,
Note
2018
2019 (1)
2020
3,049
(20,759)
(63,984)
6, 7
10
14
4
4
4
16
6.8
7.8
4
4
4
4
9
9
4
4
7,401
477
(322)
2,707
3,786
(1,341)
152
(1,445)
102
—
14,566
(47,096)
(32,529)
(556)
(873)
—
—
22
25
2,704
21,513
1,445
24,279
111
62,557
—
(1,343)
(102)
61,222
(26)
52,947
99,367
152,314
16,529
685
(484)
3,826
(4,065)
(280)
(237)
(1,290)
204
550
(5,321)
40,246
34,924
(64,130)
(1,271)
—
—
—
(10)
—
2,000
1,290
(62,121)
44
66,006
13,900
(1,982)
(204)
77,765
5
50,572
152,314
202,887
56,797
216
604
2,475
577
1,256
372
(962)
341
(254)
(2,562)
(49,206)
(51,767)
(10,375)
(907)
(3,000)
9
—
(59)
—
—
962
(13,370)
48
—
1,360
(2,245)
(341)
(1,177)
219
(66,096)
202,887
136,792
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f for
more details on the impact of the transition.
F-6
Change in working capital
Note
December 31,
2019
December 31,
2020
Variance
Trade receivables and others (excluding rebates related to
capital expenditures)
Trade payables and others (excluding payables related to
capital expenditures)
Collaboration liabilities - current and non-current portion
Deferred revenue - current and non-current portion
Change in working capital
5
8
13
13
28,716
51,635
(22,919)
(36,047)
(29,519)
(6,528)
(21,304)
(89,112)
(117,747)
(46,686)
(43,973)
(68,543)
25,382
(45,139)
(49,206)
Change in working capital
Note
December 31,
2018
December 31,
2019(1)
Variance
Trade receivables and others (excluding rebates related to
capital expenditures)
Trade payables and others (excluding payables related to
capital expenditures)
Collaboration liabilities - current and non-current portion
Deferred revenue - current and non-current portion
Change in working capital
5
8
13
13
139,012
28,716
110,296
(34,662)
(36,047)
1,385
(31,656)
(21,304)
(10,352)
(150,195)
(89,112)
(61,083)
(77,501)
(117,747)
40,246
(1) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f for
more details on the impact of the transition.
F-7
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(amounts in thousands of euro, except share data)
December 31, 2017
Restatement related to the first
application of IFRS 9
Restatement related to the first
application of IFRS 15
January 1, 2018 (after restatement) (1)
Net income
Actuarial losses on defined benefit
obligations
Foreign currency translation loss
Total comprehensive income (loss)
Allocation of prior period loss
Exercise and subscription of equity
instruments
Increase in capital, net
Share-based payment
December 31, 2018
Restatement related to the first
application of IFRS 16
Note
Number
of shares
57,607,031
Share
capital
2,880
Share
premiu
m
234,874
Retained
earnings
(103,593)
Other
reserves
180
Net
income
(loss)
(48,385)
Total
Equity
85,956
—
—
—
—
—
—
653
(653)
13,488
—
—
—
—
13,488
57,607,031
2,880
234,874
(89,454)
(473)
(48,385)
—
—
—
—
—
72,055
6,260,500
11,14
—
—
—
—
—
—
4
313
—
—
—
—
—
—
107
62,244
2,707
—
—
—
(48,385)
—
—
—
—
3,049
(599)
(26)
(625)
—
—
—
—
—
—
3,049
48,385
—
—
—
99,444
3,049
(599)
(26)
2,424
—
111
62,557
2,707
63,939,586
3,197
299,932
(137,840)
(1,099)
3,049
167,240
—
—
—
(121)
—
—
(121)
January 1, 2019 (after restatement) (2)
63,939,586
3,197
299,932
(137,961)
(1,099)
3,049
167,119
Net loss
Actuarial losses on defined benefit
obligations
Foreign currency translation gain
Total comprehensive income (loss)
Allocation of prior period income
Exercise and subscription of equity
instruments
Increase capital, net
Share-based payment
December 31, 2019
Net loss
Actuarial gains on defined benefit
obligations
Foreign currency translation gain
Total comprehensive income (loss)
Allocation of prior period loss
Exercise and subscription of equity
instruments
Increase capital, net
Share-based payment
December 31, 2020
—
—
—
—
—
11
11
11,14
511,035
14,375,000
—
—
—
—
—
—
26
719
—
—
—
—
—
—
20
65,839
3,826
—
—
—
—
3,049
—
—
—
—
(20,759)
(20,759)
622
5
627
—
—
—
—
—
—
622
5
(20,759)
(20,132)
(3,049)
—
—
—
—
46
66,558
3,826
78,825,621
3,941
369,617
(134,912)
(472)
(20,759)
217,416
—
—
—
—
—
175,331
—
—
—
—
—
—
—
9
—
—
—
—
—
—
—
38
—
2,476
—
—
(805)
(805)
(20,759)
—
—
—
(63,984)
(63,984)
(200)
1,027
827
—
—
—
—
—
(200)
222
(63,984)
(63,962)
20,759
—
—
—
47
—
2,476
79,000,952
3,950
372,131
(156,476)
355
(63,984)
155,976
(1) The consolidated financial statements as of and for the year ended December 31, 2018 include the impacts of the first application of IFRS
9 and IFRS 15 standards that became applicable on January 1, 2018. The comparative consolidated financial information as of and for the
year ended December 31, 2017 have not been restated. See Note 2.d et 2.e for more details on transition measures.
(2) The consolidated financial statements as of and for the year ended December 31, 2019 reflect the impacts of the adoption of IFRS 16 that
became applicable on January 1, 2019. The Company applied the modified retrospective transition method. As a consequence, the
comparative consolidated financial information as of and for the year ended December 31, 2018 has not been restated. See Note 2.f for
more details on the impact of the transition.
F-8
Note 1: The company
NOTES TO FINANCIAL STATEMENTS
Innate Pharma SA (the “Company” and, with its subsidiary, referred to as the “Group”), is a clinical-stage
biotechnology company specializing in immuno-oncology and dedicated to improving cancer treatment
using antibodies innovative therapies exploiting the immune system. Innate Pharma's large antibody
portfolio includes several potentially "first-in-class" clinical and preclinical candidates in cancers of high
medical need.
The Company has solid experience in research and development in immuno-oncology, having been a
pioneer in understanding the biology of NK (“natural killer”) cells, and having then been able to extend
its expertise to the tumor microenvironment, to tumor antigens. and antibody engineering. Innate Pharma
has built, internally and through its business development strategy, a large and diversified portfolio
comprising four drug candidates at the clinical stage and a solid pipeline of preclinical candidates. The
Company has been able to forge collaboration agreements with leaders in the pharmaceutical industry
such as AstraZeneca and Sanofi, allowing it to benefit from their development capacity and their expertise
for some of the Company's candidates.
From its inception, the Company has incurred losses due to its research and development (“R&D”)
activity. The financial year ended December 31, 2020 generated a €63,984 thousand net loss. As of
December 31, 2020, the shareholders’ equity amounted to €155,976 thousand. Subject to potential new
milestone payments related to its collaboration agreements, the Company anticipates incurring additional
losses until such time, if ever, that it can generate significant revenue from its product candidates in
development.
The Company’s future operations are highly dependent on a combination of factors, including: (i) the
success of its R&D; (ii) regulatory approval and market acceptance of the Company’s future product
candidates; (iii) the timely and successful completion of additional financing; and (iv) the development of
competitive therapies by other biotechnology and pharmaceutical companies. As a result, the Company is
and should continue, in the short to mid-term, to be financed through partnership agreements for the
development and commercialization of its drug candidates and through the issuance of new equity
instruments.
The Company’s activity is not subject to seasonal fluctuations.
As of December 31, 2020, the Company had one wholly owned subsidiary: Innate Pharma, Inc.,
incorporated under the laws of Delaware in 2009.
Innate Inc.'s vocation is to market Innate Pharma's products in the United States, in particular Lumoxiti
until the end of the transition plan period following the notification of return of the commercial rights of
Lumoxiti to the United States and in Europe at AstraZeneca (see note 1.1 and 1.2)
This subsidiariy is fully consolidated.
In order to simplify and rationalize the management and organization of the group, the Executive Board
decided on October 22, 2020 to dissolve Innate Pharma France without liquidation in application of the
provisions of article 1844-5 paragraph 3 of the French Civil Code. The dissolution was carried out by
means of a universal transmission of assets under the terms of which Innate Pharma France was dissolved
and all of its assets and liabilities were transferred automatically to Innate Pharma SA. The dissolution
took effect on November 30, 2020. This universal transmission of assets has no impact on the group's
consolidated financial statements as of December 31, 2020 and for the year ending.
F-9
Innate Pharma France SAS aimed in particular to:
(i) exploit any commercial license granted by a third-party;
(ii) to carry out, on its behalf or on behalf of third parties, all research, development, studies,
development of production and marketing processes for products of pharmaceutical interest and
more generally relevant the health sector;
(iii) the registration or granting of any patent or license relating directly or indirectly to its activity;
(iv) manufacture, import and distribute drugs intended for human experimentation;
(v) manufacture, use and import medicines and other products whose sale is reserved for
pharmacists.
These activities can now be carried out following the merger by Innate Pharma S.A.
1.1.
Significant contracts
The following paragraphs describe the key provisions of significant contracts.
a)
Agreements related to monalizumab with Novo Nordisk A/S and with AstraZeneca
2014 Novo Nordisk A/S monalizumab agreement
On February 5, 2014, the Company acquired from Novo Nordisk A/S full development and
commercialization rights to monalizumab. Novo Nordisk A/S received €2.0 million in cash and 600,000
ordinary shares at a price of €8.33 per share (€5.0 million). Novo Nordisk A/S is eligible to receive up to
€20.0 million in potential regulatory milestones and single-digit tiered royalties on sales of monalizumab
products. The agreement with Novo Nordisk A/S included a right to additional consideration in the event
of an out-licensing agreement. Consequently, following the agreement signed with AstraZeneca in April
2015 (as described below), the Company paid to Novo Nordisk A/S additional consideration of
€6.5 million (paid in April 2016). Following the exercise of the option by AstraZeneca in October 2018
(as described below), Novo Nordisk A/S became entitled to a second and final additional payment
amounting to $15.0 million (€13.1 million) which was recognized as a liability as of December 31, 2018
and was paid in February 2019. There are no other potential additional milestones payments due to Novo
Nordisk A/S. These amounts were added to the net book value of the intangible asset and are amortized
according to the same amortization plan as the initial €7.0 million recognized in 2014. The net book value
of the license amounted to €5.1 million as of December 31, 2020.
Refer to Notes 2.k, 2.l and 6 for accounting description.
2015 AstraZeneca monalizumab agreements
Under co-development and option agreements signed with AstraZeneca in 2015, the Company granted to
AstraZeneca an exclusive license, subject to certain exclusions, to certain of its patents and know-how to
develop, manufacture and commercialize licensed products, including monalizumab, in the field of
diagnosis, prevention and treatment of oncology diseases and conditions. The Company further granted to
AstraZeneca a worldwide, non-exclusive license to certain of its other patents to develop, manufacture
and commercialize licensed products, including monalizumab, in the field of diagnosis, prevention and
treatment of oncology diseases and conditions.
F-10
The Company received an initial payment of $250 million under these agreements in June 2015, of which
$100 million was paid to the Company as an initial payment for the co-development agreement and
$150 million was paid to the Company as consideration for the option agreement. On October 22, 2018,
AstraZeneca exercised this option, triggering the payment of $100.0 million, which was received by the
Company in January 2019.
Following the option exercise, AstraZeneca became the lead party in developing the licensed products
and must use commercially reasonable efforts to develop, obtain regulatory approval for and
commercialize each licensed product in certain major markets.
In July 31, 2019, the Company notified AstraZeneca of its decision to co-fund a future monalizumab
Phase III clinical development program.
In September 2020, the Company signed an amendment to the collaboration and license agreement
concluded with AstraZeneca in 2015. Following the analysis of a longer patient follow-up as well as the
maturation of the survival data of the Cohort 2, and after discussion with AstraZeneca, the Company
agreed to amend the original agreement. This amendment changed the financial terms relating to the
milestone payment expected following the treatment of the first patient with AstraZeneca in the first
Phase 3 trial evaluating monalizumab. The original agreement signed in 2015 provided for a milestone
payment of $100 million. Following the inclusion by AstraZeneca of the first patient in the first Phase 3
trial evaluating monalizumab (INTERLINK-1) in October 2020, and in accordance with the amendment
signed in September 2020, the Company received a payment of $50 million . An additional payment of
$50 million is now subject to interim analysis.
In addition to the initial payment, the option exercise payment and the payment received for the inclusion
of the first patient in the first Phase 3 trial, AstraZeneca is obligated to pay the Company up to
$875 million in the aggregate upon the achievement of certain development and regulatory milestones
($450 million) and commercialization milestones ($425 million). The Company is eligible to receive
tiered royalties ranging from a low double-digit to mid-teen percentage on net sales of licensed products
outside of Europe. The Company is required for a defined period of time to co-fund 30% of the Phase III
clinical trials of licensed products, subject to an aggregate cap, in order to receive 50% of the profits in
Europe.
Refer to Notes 2.a, 2.s and 13.a for accounting description.
b)
Agreement related to Lumoxiti with AstraZeneca
In October 2018, the Company obtained an exclusive license from AstraZeneca under certain patents and
know-how to develop, manufacture and commercialize Lumoxiti for all uses in humans and animals in
the United States, the European Union and Switzerland. Under this Agreement, AstraZeneca was
obligated to provide support for the continued development and commercialization of Lumoxiti in the
European Union and Switzerland prior to regulatory submission and approval as well as support for the
continued commercialization of Lumoxiti in the United States for a specified period running until
September 30, 2020. Following this transition period, the company took charge of all marketing of
Lumoxiti in the United States. In December 2020, and following a decision taken at the end of November
2020, the Company announced that it will not continue the marketing activities of Lumoxiti in the United
States and in Europe and its intention to return the commercial rights related to AstraZeneca. In
accordance with the agreement signed in 2018, the companies will develop a transition plan, including an
agreement on the costs and timeframes for the transfer of the marketing and distribution rights from
Lumoxiti in the United States to AstraZeneca in 2021. AstraZeneca will remain holder of the marketing
authorization application in Europe.
F-11
Under the agreement signed in 2018, the Company was obligated to pay a $50.0 million initial payment
(€43.8 million), which it paid in January 2019, and a $15.0 million regulatory milestone (€13.4 million),
which was paid in January 2020. The Company has reimbursed reimburse AstraZeneca for the
development, production and commercialization costs it incurs during the transition period, ended in
September 30, 2020.
Refer to Notes 2.t and 15 for accounting description.
c)
Agreement related to IPH5201 with AstraZeneca
In October 2018, the Company signed a collaboration and option agreement with AstraZeneca for co-
development and co-commercialization of IPH5201. Under the agreement, AstraZeneca paid the
Company a $50.0 million upfront payment ($26.0 million paid in October 2018 and $24.0 million paid in
January 2019), and a milestone payment of $5.0 million paid in June 2020 following the assay of the first
patient in the first Phase I trial evaluating IPH5201, in March 2020. AstraZeneca is obligated to pay the
Company up to an aggregate of $5.0 million upon the achievement of certain development milestones.
Upon exercise of its option under the agreement, AstraZeneca is committed to pay an option exercise fee
of $25.0 million and up to $800.0 million in the aggregate upon the achievement of certain development
and regulatory milestones ($300 million) and commercialization milestones ($500 million). The
arrangement also provides for a 50% profit share in Europe if the Company opts into certain co-
promoting and late stage co-funding obligations. In addition, we would be eligible to receive tiered
royalties ranging from a high-single digit to mid-teen percentage on net sales of IPH5201, or from a mid-
single digit to low-double digit percentage on net sales of other types of licensed products, outside of
Europe. The royalties payable to us under the agreement may be reduced under certain circumstances,
including loss of exclusivity or lack of patent protection. The Company recognized €13.4 million as
revenue from proceeds related to this agreement for the year ended December 31, 2020, and was also
reimbursed by AstraZeneca for certain research and development expenses related to IPH5201. The
Company has the option to co-fund 30% of the shared development expenses related to the Phase III
clinical trials in order to acquire co-promotion rights and to share in 50% of the profits and losses of
licensed products in Europe. If the Company does not opt into the co-funding obligations, among other
things, its right to share in 50% of the profits and losses in Europe and right to co-promote in certain
European countries will terminate and will be replaced by rights to receive royalties on net sales at the
rates applicable to outside of Europe. Additionally, certain milestone payments that may be payable to the
Company would be materially reduced.
Refer to Notes 2.s and 13.b for accounting description.
d)
Agreement related to additional preclinical molecules with AstraZeneca
In October 2018, the Company granted to AstraZeneca four exclusive options that are exercisable until
IND approval to obtain a worldwide, royalty-bearing, exclusive license to certain of the Company’s
patents and know-how relating to certain specified pipeline candidates to develop and commercialize
optioned products in all fields of use. Pursuant to the agreement, AstraZeneca paid the Company a
$20.0 million upfront payment (€17.5 million) in October 2018. The Company recognizes this upfront
payment in the consolidated statement of financial position as deferred revenue as of December 31, 2018,
until the exercise or the termination of each option at the earliest. Upon exercise of an option, the
Company would be entitled to an option exercise payment of $35 million, as well as development and
regulatory milestone payments ($320 million) and commercialization milestone payments ($500 million)
and tiered, mid-single digit to mid-teen percentage royalties on net sales of the applicable product. The
royalties payable to the Company may be reduced under certain circumstances, including loss of
exclusivity, lack of patent protection or the specific nature of the compound included within the
F-12
applicable product. Additionally, the Company would have rights to co-fund certain development costs in
order to obtain profit and loss sharing in Europe. So long as the Company elects to co-fund such
development costs, it will have a right to co-promote optioned products in Europe.
Refer to Notes 2.s and 13.c for accounting description.
e)
Agreements related to avdoralimab with Novo Nordisk and with AstraZeneca
2017 avdoralimab in-licensing agreement with Novo Nordisk A/S
In July 2017, the Company signed an exclusive license agreement with Novo Nordisk A/S relating to
avdoralimab. Under the agreement, Novo Nordisk A/S granted the Company a worldwide, exclusive
license to develop, manufacture and commercialize pharmaceutical products that contain or comprise an
anti-C5aR antibody, including avdoralimab. The Company made an upfront payment of €40.0 million,
€37.2 million of which was contributed in new shares and €2.8 million of which in cash. In 2020, the
Company made an additional payment of €1.0 million to Novo Nordisk A/S following the launch of the
first Phase II trial of avdoralimab. The Company is obligated to pay up to an aggregate of €369.0 million
upon the achievement of development, regulatory and sales milestones and tiered royalties ranging from a
low double-digit to low-teen percentage of net sales.
Refer to Notes 2.g, 2.i and 6 for accounting description.
2018 avdoralimab AstraZeneca agreement
On January 1, 2019, the Company entered into a clinical trial collaboration agreement with AstraZeneca
to sponsor a Phase I/II clinical trial (STELLAR-001) to evaluate the safety and efficacy of durvalumab, an
anti-PD-L1 immune checkpoint inhibitor, in combination with avdoralimab, as a treatment for patients
with select solid tumors. The Company is the sponsor of the trial and the costs are equally shared between
the two partners. This collaboration is a non-exclusive agreement and does not include any licensing
rights on avdoralimab to AstraZeneca. In the first half of 2020, and based on data from cohort extensions
in the first two cohorts, the Company decided to stop recruiting in the STELLAR-001 trial.
Refer to Notes 2.s and 13.d for accounting description.
1.2.
Key events
a)
Key events for the year ended December 31, 2020
On January 2020, the COVID-19 epidemic was declared a pandemic by the World Health Organization.
This global health crisis has led many countries to impose national containment measures and travel bans.
In view of this exceptional situation, the Company has decided to take all measures aiming as a priority at
guaranteeing the safety of its employees, the continuation of ongoing clinical trials, in compliance with
the directives of the authorities in each of the countries. The Company has assessed the impact of
uncertainties created by the COVID-19 pandemic. As of December 31, 2020, these uncertainties were
taken into account in the assumptions underlying the estimates and judgments used by the Company. The
Company will continue to update these estimates and assumptions as the situation evolves. The effects of
the COVID-19 pandemic are presented in the consolidated statement of financial position and in the
consolidated income statement in accordance with the function or the nature of the corresponding income
and expenses (impacts and risks are detailed in the paragraph - The recent global COVID-19 pandemic
F-13
could adversely affect our business, financial condition and results of operations. - in the Risk Factors
section).
On November 22, 2019, AstraZeneca submitted to the European Medicines Agency (EMA) the
Marketing Authorization Application (MAA) relating to the commercialization of Lumoxiti in Europe.
According to the agreement related to Lumoxiti with AstraZeneca, AstraZeneca is entitled to a
$15.0 million milestone that was paid by the Company in January 2020.
On January 10, 2020, the Company signed an amendment to the lease for the “Le Virage” building in
order to expand its premises. This amendment also extends the duration of the contractual commitment.
The effective date of this addendum is January 15, 2020. Consequently, and following the application of
IFRS 16 standard, the impact on the consolidated financial statements are the following: recognition of a
new right-of-use asset of €1.2 million and a new lease liability of €1.1 million.
On March 10, 2020, the Company announced the dosing of the first patient on March 9, 2020 in the
IPH5201 Phase I clinical trial. AstraZeneca made a $5.0 million (€4.6 million) milestone payment to
Innate under the companies’ October 2018 multi productoncology development collaboration. Innate
made a €2.7 million milestone payment to Orega Biotech SAS pursuant to Innate’s exclusive licensing
agreement.
On July 9, 2020, the Company filed authorization requests with the regulatory authorities for an extension
of the IPH2201-203 clinical trial. This trial will be part of the monalizumab collaboration with
AstraZeneca.
On August 11, 2020, the Company signed a financing contract with Bpifrance Financement as part of the
program set up by the French government to help develop a therapeutic solution with a preventive or
curative aim against COVID-19. This funding, for a maximum amount of €6.8 million, consists of (i) an
advance repayable only in the event of technical and commercial success and (ii) a non-repayable grant.
This funding will be received in four successive installments. The first tranche of €1,700 thousand euros
was paid at signing, and the other three tranches will be received after successful completion of certain
clinical milestones, particularly around Phase 2 of the FORCE trial.
On July 13, 2020, the Executive Board granted free shares to members of the management (“AGA Bonus
Management 2020-1” and “AGA Bonus Management 2020-2”).
On July 13, 2020, subsequent to the definitive acquisitions 57,376 free shares granted on July 3, 2019,
under the “AGA Bonus Management 2019-1” plan and the exercise of 25,000 “2011-2” BSA , to carry
out a capital increase of €4,119 and an increase in share premium of €43,000, that can be broken down as
follows: (i) a creation of 57,376 ordinary shares, with a nominal value of €0.05 issued free of charge by
deduction from the issue premium, and (ii) a creation of 25,000 ordinary shares, with a nominal value of
€0.05, for an issue price of €1.77 per share.
On July 21, 2020, the Executive Board granted 102,000 stock options to members of the management and
employees of the subsidiary Innate Pharma Inc ("2020-1 Incentive Stock Options").
On August 5 2020, the Executive Board granted 769,202 free performances shares to employees of the
Company (“AGA Perf Employees 2020-1”), and 710,000 free performances shares to members of the
management (“AGA Perf Management 2020-1”).
On September 7, 2020, the Company signed an amendment to the monalizumab collaboration and license
agreement concluded with AstraZeneca in 2015. Following the analysis of a longer patient follow-up as
well as the maturation of the survival data of the Cohort 2, and after discussion with its partner
F-14
AstraZeneca, the Company agreed to amend their agreement. The amendment now provides for a
payment of $50.0 million upon treatment of the first patient with AstraZeneca in the Phase 3 trial, and a
payment of $50.0 million after a planned interim analysis demonstrating that the combination meets a pre-
defined threshold of clinical activity. All other development and trade milestone payments related to the
agreement remain unchanged. On October 23, 2020, the Company announced the inclusion of the first
patient in the phase 3 "INTERLINK-1" trial. Pursuant to the amendment to the collaboration agreement
signed on September 7, 2020, AstraZeneca made a payment of $50.0 million (€41.2 million) on
December 7, 2020.
On December 11, 2020, the Company announced that it would not continue the marketing activities of
Lumoxiti in the United States and in Europe. In accordance with the agreement on the acquisition of the
commercial rights of Lumoxiti signed with AstraZeneca in October 2018, Innate has decided to return
these rights in the United States and in Europe to AstraZeneca. On the date of the decision to return the
rights, the Lumoxiti rights were fully written down to their net book value, i.e €43.5 million.
The Company announced the decision taken on December 8, 2020 by Sanofi to advance IPH6101/
SAR443579 towards regulatory preclinical studies for the study of a new investigational drug. The
decision triggered a milestone payment of €7.0 million from Sanofi to the Company. This payment was
received by the Company on February 5, 2021.
2) Accounting policies and statement of compliance
a)
Basis of preparation
Consolidated financial statements of the Company for the years ended December 31, 2018, 2019 and
2020 (the “Consolidated Financial Statements”) have been prepared under the responsibility of the
management of the Company in accordance with the underlying assumptions of going concern as the
Company’s loss-making situation is explained by the innovative nature of the products developed,
therefore involving a multi-year research and development phase.
The general accounting conventions were applied in compliance with the principle of prudence, in
accordance with the underlying assumptions namely (i) going concern, (ii) permanence of accounting
methods from one year to the next and (iii) independence of financial years, and in conformity with the
general rules for the preparation and presentation of consolidated financial statements in accordance with
IFRS, as defined below.
Except for share data and per share amounts, the Consolidated Financial Statements are presented in
thousands of euro. Amounts are rounded up or down to the nearest whole number for the calculation of
certain financial data and other information contained in these accounts. Accordingly, the total amounts
presented in certain tables may not be the exact sum of the preceding figures
b)
Statement of compliance
The Consolidated Financial Statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”) and
were approved and authorized for issuance by the Board of Directors of the Company on April 26,
2021.They will be approved by the General Meeting of the Company on May 28, 2021, which has the
right to modify them.
Due to the listing of ordinary shares of the Company on Euronext Paris and in accordance with the
European Union’s regulation No. 1606/2002 of July 19, 2002, the Consolidated Financial Statements of
F-15
the Company for the years ended December 31, 2018, 2019 and 2020 are also prepared in accordance
with IFRS, as adopted by the European Union (EU). For the years ended December 31, 2018, 2019 and
2020, all IFRS that the IASB had published and that are mandatory are the same as those endorsed by the
EU and mandatory in the EU. As a result, the Consolidated Financial Statements comply with
International Financial Reporting Standards as published by the IASB and as adopted by the EU.
IFRS include International Financial Reporting Standards (IFRS), International Accounting Standards
(“IAS”), as well as the interpretations issued by the Standing Interpretations Committee (“SIC”), and the
International Financial Reporting Interpretations Committee (“IFRIC”). The main accounting methods
used to prepare the Consolidated Financial Statements are described below. These methods were used for
all periods presented.
c)
Recently issued accounting standards and interpretations
Application of the following new and amended standards was mandatory for the first time for the
financial period beginning on January 1, 2018 and, as such, they have been adopted by the Company:
•
•
IFRS 9, which supersedes IAS 39; and
IFRS 15, which supersedes IAS 11, IAS 18 and the corresponding interpretations (IFRIC 13,
IFRIC 15, IFRIC 18 and SIC 31).
Application of the following new and amended standards is mandatory for the first time for the financial
period beginning on January 1, 2019 and, as such, they have been adopted by the Company:
•
IFRS 16 “Leases”, which supersedes IAS 17 and the corresponding interpretations (IFRIC 4,
SIC 15 and SIC 27).
• Amendments to IAS 19 “Employee benefits—Plan Amendment, Curtailment or Settlement”,
mandatory for annual periods beginning on or after January 1, 2019.
• Amendments to IAS 28 regarding “Long-term interests in associates and Joint-Ventures”.
• Amendments to IFRS 9 “Financial instruments—Prepayment features with negative
compensation”.
•
IFRIC 23 “Uncertainty over income tax treatments”.
• Annual improvements of the cycle 2015-2017 (amendments to IAS 12, IAS 23, IFRS 3 and
IFRS 11).
Those standards and interpretations have no impact on the Consolidated Financial statements, except as
noted below following IFRS 9, IFRS 15 and IFRS 16 application.
Application of the following new and amended standards is mandatory for the first time for the financial
period beginning on January 1, 2020 and, as such, they have been adopted by the Company:
• Amendments to IFRS 3 "Definition of a company", published on October 22, 2018.
• Amendment to IFRS 16: "Covid-19-Adjustments to tenants' rents". The entry into force of this
amendment had no impact on the Company's financial statements.
• Amendments to IAS 1 and IAS 8 relating to the modification of the definition of the term
“significant”, published on October 31, 2018.
• Amendments to IAS 39, IFRS 7 and IFRS 9 relating to the reform of benchmark interest rates.
F-16
• Conceptual framework for financial reporting and modification of references to Conceptual
Framework in IFRS.
The following new standards, amendments to existing standards and interpretations have been published
but are not applicable in 2020 or have not yet been adopted by the European Union, and have not been
applied early:
• Amendment to IFRS 9 (known as "Phase 2") and relating to the reform of benchmark interest
rates
The accounting rules and valuation principles used for the financial statements at December 31, 2020 are
identical to those used for the previous comparative year.
d)
Adoption of IFRS 15 in 2019
IFRS 15 Revenue from contracts with customers, or IFRS 15, which supersedes IAS 11 Construction
contracts, or IAS 11, and IAS 18 Revenue, or IAS 18, came into effect on January 1, 2018. The amended
accounting policy applied to revenue is presented in Note 2.s.
The Company decided to apply the modified retrospective approach without any of the practical
expedients allowed by IFRS 15. According to this approach, the comparative information is not restated
and the cumulative impact of the first application is presented as an adjustment of the opening equity of
the year of first application. The modified retrospective approach does not present comparative
information, but requires a comparison for the first application year of each financial statement line item
affected by the application of this standard as compared to IAS 11, IAS 18 and related interpretations that
were in effect before the change. This comparison is presented below.
The impact of the adoption of IFRS 15 is limited to the accounting treatment of the contributions paid by
the Company pursuant to its co-financing under the collaboration agreement with AstraZeneca related to
monalizumab. Until December 31, 2017, under IAS 18, the Company’s co-financing share of R&D
expenses incurred by AstraZeneca were recognized as R&D expenses.
In the context of the collaboration agreement with AstraZeneca, the Company and AstraZeneca make
quarterly-cost sharing payments to one another to ensure that each party co-finances the R&D performed
by AstraZeneca. Consequently, under IFRS 15, amounts due to the partner:
• Are no longer recognized as R&D expenses, but are recorded as a reduction of the transaction
price recorded as revenue following the identified performance obligation under the
collaboration agreement; and
• Are classified in collaboration liability in the consolidated statement of financial position
(instead of a classification in deferred revenue under IAS 18).
When a collaboration liability is denominated in a foreign currency, which is the case in the context of
this AstraZeneca agreement, it is translated at each reporting date with the appropriate exchange rate,
resulting in foreign exchange gains or losses recorded in the consolidated statement of income (loss).
Application of IFRS 15 generated a deferred tax liability of €3,098 thousand as of January 1, 2018. The
Company recorded a deferred tax asset equaling the amount of deferred tax liability as of January 1, 2018
as a result of tax losses carryforward.
F-17
The impact of the first adoption of IFRS 15 on the statement of financial position and the consolidated
statement of income (loss) as of January 1, 2018 are presented below:
(amounts in thousands of euro)
ASSETS
Non-current assets
Deferred tax assets
Total non-current assets
Total current assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS'S EQUITY
Sharehoder's Equity
Reserves
Total shareholders’ equity
Non-current liabilities
Collaboration liabilities—non-current portion
Deferred revenue—non-current portion
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Trade payables and others
Collaboration liabilities—current portion
Deferred revenue—current portion
Total current liabilities
TOTAL LIABILITIES AND SHAREHOLDERS'S
EQUITY
(amounts in thousands of euro)
ASSETS
Non-current assets
Deferred tax assets
Total non-current assets
Total current assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS'S EQUITY
Sharehoder's Equity
Retained earnings
Net result
Total shareholders’ equity
Non-current liabilities
Collaboration liabilities—non-current portion
F-18
December 31,
2017 as
published as
published
IFRS 15
restatement
January 1, 2018
restated restated
—
117,501
137,521
255,023
3,098
3,098
—
3,098
3,098
120,599
137,521
258,121
(103,595)
85,956
13,488
13,488
(90,107)
99,444
—
87,005
—
95,158
24,657
—
47,909
73,909
17,314
(25,246)
3,098
(4,834)
(5,156)
27,437
(27,837)
(5,556)
17,314
61,759
3,098
90,324
19,501
27,437
20,072
68,353
255,023
3,098
258,121
As of December
31, 2018 as
published
IFRS 15 impact
As of December
31, 2018,
excluding IFRS
15 impacts
1,561
131,574
319,643
451,216
(1,561)
(1,561)
—
(1,561)
—
130,013
319,643
449,655
(137,840)
3,049
167,240
(13,488)
7,349
(6,139)
(152,427)
10,398
161,101
10,669
(10,669)
—
Deferred revenue—non-current portion
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Trade payables and others
Collaboration liabilities—current portion
Deferred revenue—current portion
Total current liabilities
TOTAL LIABILITIES AND SHAREHOLDERS'S
EQUITY
(amounts in thousands of euro)
Revenue from collaboration and licensing agreements
Government financing for research expenditures
Revenue and other income
Research and development expenses
General and administrative expenses
Operating expenses
Net income (loss) from distribution agreements
Operating income
Financial income
Financial expenses
Net financial income (loss)
Net income before tax
Income tax
Net income
(in € per share)
Basic income per share
Diluted income per share
e)
Adoption of IFRS 9 in 2018
68,098
1,561
87,238
91,655
20,987
82,096
196,737
451,216
7,958
(1,561)
(4,272)
3,382
(20,987)
26,455
8,850
76,056
—
82,966
95,037
—
108,551
205,587
(1,561)
449,655
Year ended
December 31,
2018 as
published
IFRS 15
Year ended
December 31,
2018, excluding
IFRS 15 impact
100,925
14,060
114,985
(85,097)
(18,142)
(103,239)
(1,109)
10,637
6,002
(6,571)
(569)
10,067
333
10,397
21,033
—
21,033
(15,542)
—
(15,542)
—
5,491
—
1,858
1,858
7,349
—
7,349
0.18
0.18
79,892
14,060
93,952
(69,555)
(18,142)
(87,697)
(1,109)
5,146
6,002
(8,429)
(2,427)
2,718
333
3,049
0.05
0.05
IFRS 9 Financial instruments, or IFRS 9, which supersedes IAS 39 Financial instruments: recognition and
measurement, or IAS 39, came into effect on January 1, 2018. IFRS 9 defines new principles covering the
classification and measurement of financial instruments, the recognition of impairment provisions for
credit risk on financial assets and hedge accounting. The Company has applied IFRS 9 as of January 1,
2018 by recording the cumulative impact in opening equity at this transition date.
Regarding financial instruments, IFRS 9 requires, for non-derivative financial assets, a change of name of
the sub-categories of financial assets without, however, modifying the valuation principles of these assets,
which remain either at fair value or amortized cost. The valuation models used by the Company remain
unchanged.
The modification of the impairment principles for financial assets measured at amortized cost, which now
consists of adopting an approach based on expected losses, in practice has resulted in the Company not
recognizing impairment and mainly impacts trade receivables, which were nil as of January 1, 2018.
F-19
The only impact of IFRS 9 on the financial statements of the Company concerns the recognition of the
variance in fair value of the mutual funds. Under IAS 39, the variance in fair value of these financial
assets was recognized in other comprehensive income. Under IFRS 9, it will be recognized in the
statement of income. Following the application of the standard, the impact on the opening statement of
financial position is a reclassification from the cumulated comprehensive income to retained earnings in
an amount of €653 thousand.
The amended accounting policy applied to financial instruments is presented in Note 2.j.
f)
Adoption of IFRS 16 in 2019
IFRS 16 was issued in January 2016 and it replaces IAS 17—Leases, IFRIC 4 “Determining whether an
Arrangement contains a Lease”, SIC-15 “Operating Leases-Incentives” and SIC-27 “Evaluating the
Substance of Transactions Involving the Legal Form of a Lease.” IFRS 16 sets out the principles for the
recognition, measurement, presentation and disclosure of leases and requires lessees to account for all
leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17.
The standard includes two recognition exemptions for lessees—leases of “low-value” assets (e.g.,
personal computers) and short-term leases (including leases with a lease term of 12 months or less). At
the commencement date of a lease, a lessee recognizes a liability to make lease payments, or the lease
liability, and an asset representing the right to use the underlying asset during the lease term, or the right-
of-use asset. Lessees are required to separately recognize the interest expense on the lease liability and the
depreciation expense on the right-of-use asset. The change in presentation of operating lease expenses
results in a corresponding increase in cash flows from operating activities and a decrease in cash flows
from financing activities.
According to the new standard, the Company determined the lease term including any lessee’s extension
or termination option that is deemed reasonably certain. The assessment of such options was performed at
the commencement of a lease and required judgment by the management. Measuring the lease liability at
the present value of the remaining lease payments required using an appropriate discount rate in
accordance with IFRS 16. The discount rate is the interest rate implicit in the lease or if that cannot be
determined, the incremental borrowing rate at the date of the lease commencement. The incremental
borrowing rate can have a significant impact on the net present value of the right-of use asset and lease
liability recognized and requires judgement.
Lessees remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease
term, a change in future lease payments resulting from a change in an index or rate used to determine
those payments). The lessee generally recognizes the amount of the remeasurement of the lease liability
as an adjustment to the right-of-use asset.
Following analysis carried out by the Company, the contracts impacted by this new standard mainly relate
to the rental of premises.
With respect to the transition method, the Company has opted for the modified retrospective approach to
contracts previously reported as leases under IAS 17 or IFRIC 4, and, therefore, will only recognize
leases on its statement of financial position as of January 1, 2019. Accordingly, comparative information
is not restated and the cumulative effect of initially applying IFRS 16 is presented as an adjustment to
retained earnings. As of January 1, 2019, the right of use is recognized as assets for their net value (as if
IFRS 16 had always been applied) and the present value of the remaining payments is recognized as a
liability.
The Company applies the following practical expedients as allowed by IFRS 16:
• Apply a single discount rate to the assets with similar characteristics;
F-20
• Use of hindsight in determining the lease term where the contract contains options to extend or
terminate the lease;
•
•
Exclude lease contracts for which the lease term ends within 12 months as of the date of initial
application, thus considering them short-term lease contracts; and
Exclude leases of assets with a replacement value of less than approximately €5 thousand.
The impact of the first adoption of IFRS 16 on the statement of financial position as of January 1, 2019 is
presented below:
(amounts in thousands of euro)
ASSETS
Total current assets
Property and equipment
Total non-current assets
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Financial liabilities - current portion
Total current liabilities
Financial liabilities - non-current portion
Provision - non-current portion
Total non-current liabilities
Retained earnings
Total shareholders' equity
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY
December 31,
2018 as
published as
published
IFRS 16
restatement
January 1, 2019
restated
319,643
10,216
131,574
451,216
1,347
196,737
3,175
38
87,238
(137,840)
167,240
—
1,097
1,097
1,097
320
320
848
50
898
(121)
(121)
319,643
11,313
132,671
452,313
1,667
197,057
4,023
88
88,136
(137,961)
167,119
451,216
1,097
452,313
The weighted average incremental borrowing rate applied by the Company to lease liabilities recognized
in the consolidated financial statements as of January 1, 2019 was 2.01%.
The reconciliation between the lease liabilities accounted for at January 1, 2019 and the non-cancellable
lease commitments disclosed as of December 31, 2018 is as follow:
Commitments related to operating leases agreements as of Commitments related to operating leases
agreements as of December 31, 2018
Lease liabilities related to financial leases as of Lease liabilities related to financial leases as of
December 31, 2018
Lease extension (Building "Le Virage")
Discount effect
Exemption
Lease liabilities as of Lease liabilities as of January 1, 2019
769
2,098
445
(46)
0
3,266
IFRS 16 application has no material impact on the consolidated statements of cash flows and the
consolidated statements of income (loss) for the year ended December 31, 2019.
g)
Change in accounting policies
Except for the adoption of IFRS 16 as of January, 2019, there has been no change in accounting policies
for any of the years presented.
F-21
h)
Translation of transactions denominated in foreign currency
Pursuant to IAS 21 The effects of changes in foreign exchange rates, transactions performed by
consolidated entities in currencies other than their functional currency are translated at the prevailing
exchange rate on the transaction date.
Trade receivables and payables and liabilities denominated in a currency other than the functional
currency are translated at the period-end exchange rate. Unrealized gains and losses arising from
translation are recognized in net operating income.
Foreign exchange gains and losses arising from the translation of inter-Group transactions or receivables
or payables denominated in currencies other than the functional currency of the entity are recognized in
the line “net financial income (loss)” of the consolidated statements of income (loss).
Foreign currency transactions are translated into the presentation currency using the following exchange
rates:
December 31, 2018
December 31, 2019
December 31, 2020
€1 EQUALS TO
AVERAGE
RATE
CLOSING
RATE
AVERAGE
RATE
CLOSING
RATE
AVERAGE
RATE
CLOSING
RATE
USD
1.1810
1.1450
1.1195
1.1234
1.1422
1.2271
i)
Consolidation method
The Group applies IFRS 10 Consolidated financial statements. IFRS 10 presents a single consolidation
model identifying control as the criteria for consolidating an entity. An investor controls an investee if it
has the power over the entity, is exposed or has rights to variable returns from its involvement with the
entity and has the ability to use its power over the entity to affect the amount of the investor’s returns.
Subsidiaries are entities over which the Company exercises control. They are fully consolidated from the
date the Group obtains control and are deconsolidated from the date the Group ceases to exercise control.
Intercompany balances and transactions are eliminated.
j)
Financial instruments
Financial assets
Financial assets are initially measured at fair value plus directly attributable transaction costs in the case
of instruments not measured at fair value through profit or loss. Directly attributable transaction costs of
financial assets measured at fair value through profit or loss are recorded in the consolidated statement of
income (loss).
Under IFRS 9, financial assets are classified in the following three categories:
•
•
•
Financial assets at amortized cost;
Financial assets at fair value through other comprehensive income (“FVOCI”); and
Financial assets at fair value through profit or loss.
The classification of financial assets depends on:
•
•
The characteristics of the contractual cash flows of the financial assets; and
The business model that the entity follows for the management of the financial asset.
Financial assets at amortized cost
Financial assets are measured at amortized cost when (i) they are not designated as financial assets at fair
value through profit or loss, (ii) they are held within a business model whose objective is to hold assets in
F-22
order to collect contractual cash flows and (iii) they give rise to cash flows that are solely payments of
principal and interest on the principal amount outstanding (“SPPI” criterion). They are subsequently
measured at amortized cost, determined using the effective interest method (“EIR”), less any expected
impairment losses in relation to the credit risk. Interest income, exchange gains and losses, impairment
losses and gains and losses arising on derecognition are all recorded in the consolidated statement of
income (loss).
This category primarily includes trade receivables, as well as other loans and receivables. Long-term
loans and receivables that are not interest-bearing or that bear interest at a below-market rate are
discounted when the amounts involved are material.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income is mainly comprised is composed of
debt instruments whose contractual cash flows represent payments of interest or repayments of principal,
and which are managed with a view to collecting cash flows and selling the asset. Gains and losses arising
from changes in fair value are recognized in equity within the statement of comprehensive income in the
period in which they occur. When such assets are derecognized, the cumulative gains and losses
previously recognized in equity are reclassified to profit or loss for the period within the line items
Financial income or Financial expenses. The Company did not hold this type of instrument as of January
1, 2020 or as of December 31, 2020.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss is comprised of:
•
•
financial assets that are not part of the above categories; and
instruments that management has designated as “fair value through profit or loss” on initial
recognition.
Gains and losses arising from changes in fair value are recognized in profit or loss within the line items
financial income or financial expenses.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade receivables are recognized when the
Company has an unconditional right to payment by the customer. Impairment losses on trade receivables
and others are estimated using the expected loss method, in order to take account of the risk of payment
default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all
accounts receivable at each reporting date using an average expected loss rate, determined primarily on
the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there
are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit
risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is
recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment
losses on accounts receivable are recognized within Operating expenses in the consolidated statement of
income (loss).
Financial liabilities
Financial liabilities comprise deferred revenue, collaboration liabilities, loans and trade and other
payables.
Financial liabilities are initially recognized on the transaction date, which is the date that the Company
becomes a party to the contractual provisions of the instrument. They are derecognized when the
Company’s contractual obligations are discharged, cancelled or expire.
F-23
Loans are initially measured at fair value of the consideration received, net of directly attributable
transaction costs. Subsequently, they are measured at amortized cost using the EIR method. All costs
related to the issuance of loans, and all differences between the issuance proceeds net of transaction costs
and the value on redemption, are recognized within financial expenses in the consolidated statement of
income (loss) over the term of the debt using the EIR method.
Other financial liabilities include trade accounts payable, which are measured at fair value (which in most
cases equates to face value) on initial recognition, and subsequently at amortized cost.
Cash and cash equivalents
Cash equivalents are short-term, highly liquid investments, that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents
comprise the cash that is held at the bank and petty cash as well as the short-term fixed deposits for which
the maturity is less than three months.
For the purpose of establishing the statement of cash flows, cash and cash equivalents include cash in
hand, demand deposits and short fixed-term deposits with banks and short-term highly liquid investments
with original maturities of three months or less, net of bank overdrafts.
Cash and cash equivalents are initially recognized at their purchase costs on the transaction date, and are
subsequently measured at fair value. Changes in fair value are recognized in profit or loss.
Fair value of financial instruments
Under IFRS 13 Fair value measurement and IFRS 7 Financial instruments: disclosures, or IFRS 7, fair
value measurements must be classified using a hierarchy based on the inputs used to measure the fair
value of the instrument. This hierarchy has three levels:
•
•
•
level 1: fair value calculated using quoted prices in an active market for identical assets and
liabilities;
level 2: fair value calculated using valuation techniques based on observable market data such
as prices of similar assets and liabilities or parameters quoted in an active market; and
level 3: fair value calculated using valuation techniques based wholly or partly on unobservable
inputs such as prices in an inactive market or a valuation based on multiples for unlisted
securities.
k)
Intangible assets
Research and development (R&D) expenses
In accordance with IAS 38 Intangible assets, or IAS 38, expenses on research activities are recognized as
an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Company’s development activities is recognized
only if all of the following conditions are met:
•
•
•
•
Technically feasible to complete the intangible asset so that it will be available for use or sale;
The Company has the intention to complete the intangible assets and use or sell it;
The Company has the ability to use or sell the intangible assets;
The intangible asset will generate probable future economic benefits, or indicate the existence
of a market;
F-24
• Adequate technical, financial and other resources to complete the development are available;
and
•
The Company is able to measure reliably the expenditure attributable to the intangible asset
during its development.
Because of the risks and uncertainties related to regulatory approval, the R&D process and the availability
of technical, financial and human resources necessary to complete the development phases of the product
candidates, the six criteria for capitalization are usually considered not to have been met until the product
candidate has obtained marketing approval from the regulatory authorities. Consequently, internally
generated development expenses arising before marketing approval has been obtained, mainly the cost of
clinical trials, are generally expensed as incurred within Research and development expenses.
However, some clinical trials, for example those undertaken to obtain a geographical extension for a
molecule that has already obtained marketing approval in a major market, may in certain circumstances
meet the six capitalization criteria under IAS 38, in which case the related expenses are recognized as an
intangible asset. These related costs are capitalized when they are incurred and amortized on a straight
line basis over their useful lives beginning when marketing approval is obtained.
Licenses
Payments for separately acquired research and development are capitalized within “Other intangible
assets” provided that they meet the definition of an intangible asset: a resource that is (i) controlled by the
Group, (ii) expected to provide future economic benefits for the Group and (iii) identifiable (i.e. it is
either separable or arises from contractual or legal rights).
In accordance with paragraph 25 of IAS 38, the first recognition criterion, relating to the likelihood of
future economic benefits generated by the intangible asset, is presumed to be achieved for research and
development activities when they are acquired separately.
In this context, amounts paid to third parties in the form of initial payments or milestone payments
relating to product candidates that have not yet obtained a regulatory approval are recognized as
intangible assets. These rights are amortized on a straight-line basis:
(i) after obtaining the regulatory approval, over their useful life; or
(ii) after entering in an out-license collaboration agreement with a third-party partner, over their
estimated useful life. This estimated useful life takes into consideration the period of protection
of the out-licensed exclusivity rights and the anticipated period over which the Company will
receive the economic benefits of the asset.
Unamortized rights (before marketing authorization) are subject to impairment tests in accordance with
the method defined in Note 6.
When intangible assets acquired separately are acquired through variable or conditional payments, these
payments are recognized as an increase of the carrying amount of the intangible asset when they become
due. Royalties due by the Company related to acquired licenses are recognized as operating expenses
when the Company recognizes sales subject to royalties.
Other intangible assets
Other intangible assets consist of acquired software. Costs related to the acquisition of software licenses
are recognized as assets based on the costs incurred to acquire and set up the related software. Software is
amortized using the straight-line method over a period of one to three years depending on the anticipated
period of use.
F-25
l)
Property and equipment
Property and equipment are carried at acquisition cost. Major renewals and improvements are capitalized
while repairs and maintenance are expensed as incurred.
Property and equipment are depreciated over their estimated useful lives using the straight-line
depreciation method. Leasehold improvements are depreciated over the life of the improvement or the
remaining lease term, whichever is shorter.
The headquarters of the Company was split into several components (e.g., foundations, structure,
electricity, heating and ventilation systems) which are depreciated over different useful lives according to
the anticipated useful life of these elements.
Depreciation periods are as follows:
Buildings and improvements on buildings.......................................................................... 20 to 40 years
Installations.........................................................................................................................
5 to 20 years
Technical installations and equipment................................................................................
8 years
Equipment and office furniture...........................................................................................
5 years
Computers and IT equipment..............................................................................................
3 years
m)
Impairment of intangible assets, property, and equipment,
The Group assesses at the end of each reporting period whether there is an indication that intangible
assets, property and equipment may be impaired. If any indication exists, the Group estimates the
recoverable amount of the related asset.
Whether or not there is any indication of impairment, intangible assets not yet available for use are tested
for impairment annually by comparing their carrying amount with their recoverable amount.
Pursuant to IAS 36—Impairment of Assets, criteria for assessing indication of loss in value may notably
include performance levels lower than forecast, a significant change in market data or the regulatory
environment, or obsolescence or physical damage of the asset not included in the amortization/
depreciation schedule. The recognition of an impairment loss alters the amortizable/depreciable amount
and potentially, the amortization/depreciation schedule of the relevant asset.
Impairment losses on intangible assets, property and equipment shall be reversed subsequently if the
impairment loss no longer exists or has decreased. In such case, the recoverable amount of the asset is to
be determined again so that the reversal can be quantified. The asset value after reversal of the
impairment loss may not exceed the carrying amount net of depreciation/amortization that would have
been recognized if no impairment loss had been recognized in prior periods.
The Group does not have any intangible assets with an indefinite useful life. However, as explained in
Note 2.k, the Group recognized intangible assets in progress, which will be amortized once marketing
authorization is received.
n)
Employee benefits
Long-term pension benefits
Company employees are entitled to pension benefits required by French law:
•
•
Pension benefit, paid by the Company upon retirement (i.e. defined benefit plan); and
Pension payments from social security entities, financed by contributions from businesses and
employees (i.e. defined contribution plan”).
F-26
In addition, the Company has implemented an additional, non-mandatory, pension plan (“Article 83”),
initially for the benefit of executives only. This plan was extended to the non-executive employees
starting on January 1, 2014. This plan meets the definition of defined contribution plan and is financed
through a contribution that corresponds to 2.2% of the employee’s annual wage, with the Company
paying 1.4% and the employee paying 0.8%.
For the defined benefit plan, the costs of the pension benefit are estimated using the “projected unit
credit” method. According to this method, the pension cost is accounted for in the consolidated statement
of income (loss), so that it is distributed uniformly over the term of the services of the employees. The
pension benefit commitments are valued using the actual present value of estimated future payments,
adopting the rate of interest of long-term bonds in the private sector (i.e. Euro zone AA or higher rated
corporate bonds + 10 years). The difference between the amount of the provision at the beginning of a
period and at the close of that period is recognized in the consolidated statement of income (loss) for the
portion representing the costs of services rendered and the net interest costs, and through other
comprehensive income for the portion representing the actuarial gains and losses. The Company’s
commitments under the defined benefit plan are not covered by any plan assets.
Payments made by the Company for defined contribution plans are accounted for as expenses in the
consolidated statement of income (loss) in the period in which they are incurred.
Other long-term benefits
The Company pays seniority bonuses to employees reaching 10, 15 and 20 years of seniority. These
bonuses represent long-term employee benefits. Under IAS 19R “Employee benefits”, they are recording
as a defined benefit obligation in the consolidated statement of financial position, but their
remeasurements is not recognized in the consolidated statement of other comprehensive income (loss).
Other short-term benefits
An accrued expense is recorded for the amount the Company expects to pay its eligible employees in
relation to services rendered during the reporting period (actual legal or implicit obligation to make to
these payments on a short-term basis).
o)
Leases
The Company assesses whether a contract is or contains a lease, at inception of the contract. The
Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (such as tablets and personal computers, small items of
office furniture and telephones). For these leases, the Company recognises the lease payments as an
operating expense on a straight-line basis over the term of the lease unless another systematic basis is
more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily
determined, the Company uses its incremental borrowing rate. Lease payments included in the
measurement of the lease liability comprise:
•
•
•
fixed lease payments (including in-substance fixed payments), less any lease incentives
receivable;
variable lease payments that depend on an index or rate, initially measured using the index or
rate at the commencement date;
the amount expected to be payable by the lessee under residual value guarantees;
F-27
•
•
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
and
payment of penalties for terminating the lease, if the lease term reflects the exercise of an
option to terminate the lease.
The lease liability is included in the financial liabilities in the consolidated statement of financial position
and is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments
made.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day, less any lease incentives received and any initial
direct costs. They are subsequently measured at cost less accumulated depreciation and impairment
losses.
Whenever the Company incurs an obligation for costs to dismantle and remove a leased asset, restore the
site on which it is located or restore the underlying asset to the condition required by the terms and
conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs
relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are
incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying
asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects
that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets are included in the property and equipment line item in the consolidated statement
of financial position.
The Company applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss.
p)
Provisions and contingent liabilities
In the course of its business, the Company could be exposed to certain risks and litigations, notably in
relation to contractual arrangements. Provisions are recognized when the Company has a present legal or
constructive obligation as a result of past events, it is probable that the Company is subject to a release of
outflow representatives of economic benefits to settle the obligation and a reliable estimate of the amount
of the obligation can be made. Management of the Company estimates the probability and the expected
amount of a cash outflow associated with risks, together with the other information to be provided on
possible liabilities. Where the Company expects a provision to be reimbursed, for example under an
insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement
is certain.
In addition, the Company may assess a potential obligation towards a third party resulting from events the
existence of which will only be confirmed by the occurrence, or not, of one or more events. uncertain
futures which are not totally under the control of the Company; or an obligation to a third party for which
it is not probable or certain that it will result in an outflow of resources without at least equivalent
consideration expected from the latter. These elements are mentioned in note 18 of the group's
consolidated financial statements as contingent liabilities.
F-28
q)
Capital
Ordinary shares are classified in shareholders’ equity. Costs associated with the issuance of new shares
are directly accounted for in shareholders’ equity in diminution of issuance premium.
The Company’s own shares bought in the context of a brokering/liquidity agreement are presented as a
reduction in shareholders’ equity until their cancellation, their reissuance or their disposal.
r)
Share-based compensation
Since its inception, the Company has established several plans for compensation paid in equity
instruments in the form of free shares (“Attributions gratuites d’actions,” or “AGA”), free preferred
shares convertible into ordinary shares (“Attributions gratuites d’actions de préférence convertibles en
actions ordinaires,” or “AGAP”), free performance shares (“Attributions gratuites d’actions de
performance,” or “AGA Perf”), share subscription warrants (“Bons de souscription d’actions,” or
“BSA”), redeemable share subscription warrants (“Bons de Souscription et/ou d’Acquisition d’Actions
Remboursables,” or “BSAAR”), granted to its employees, executives, members of the Executive Board
and scientific consultants.
Pursuant to IFRS 2—Share-based Payment, these awards are measured at their fair value on the date of
grant. The fair value is calculated with the most relevant formula regarding the conditions and the
settlement of each plan.
For share-based compensation granted to employees, executives, members of the Executive Board and
scientific consultants, the Company uses the Black-Scholes and Monte Carlo approach pricing models to
determine the fair value of the share-based compensation. For scientific consultants providing similar
services, as the Company cannot estimate reliably the fair value of the goods or services received, it
measures the value of share-based compensation and the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments granted also using the Black-Scholes option pricing
model. The fair value of free shares included in the model is determined using the value of the shares at
the time of their distribution.
In calculating the fair value of share-based compensation, the Company also considers the vesting period
and the employee turnover weighted average probability as described in Note 11. Other assumptions used
are also detailed in Note 11.
The Company recognizes the fair value of these awards as a share-based compensation expense over the
period in which the related services are received with a corresponding increase in shareholders’ equity.
Share-based compensation is recognized using the straight-line method. The share compensation expense
is based on awards ultimately expected to vest and is reduced by expected forfeitures.
s)
Revenue
Revenue from collaboration and license agreements
To date, the Company’s revenue results primarily from payments received in relation to research,
collaboration and licensing agreements signed with pharmaceutical companies. These contracts generally
provide for components such as:
•
•
non-refundable upfront payments upon signature;
payments for the exercise of the option to acquire licenses of drug candidates;
• milestones payments triggered following stages of development (scientific results obtained by
the Company or by the partner, obtaining regulatory marketing approvals);
•
payments related to the Company’s R&D activities;
F-29
•
payments triggered by the start of the commercialization of products resulting from
development work or by crossing cumulative thresholds of product sales, as well as the
allocation of royalties on future sales of products or a sharing of profits on sales.
Under collaboration and license agreements, the Company may promise its partners licenses on
intellectual property, as well as research and development services. According to IFRS 15, the Company
has to determine if the promises included in the contract are distinct (therefore recognized separately as
revenue) or if they have to be combined as a single performance obligation.
When promises in a collaboration and license agreement are considered as a single performance
obligation, the Company has to determine if the combined performance obligation is satisfied over time or
at point in time. If the combined performance obligation is satisfied over time, revenue recognition is
based on the percentage of completion of the costs to be incurred. Non-refundable initial payments are
deferred and recognized as revenue during the period the Company is engaged to deliver services to the
customer on the basis of the corresponding costs.
When promises in a collaboration and license agreement are considered as separate performance
obligations, revenue is allocated to each obligation proportionally to its transaction price, which
corresponds to a price each performance obligation would have been sold in the context of a separate
transaction.
In accordance with IFRS 15, variable considerations cannot be included in the estimated transaction price
as long as it not highly probable that the related revenue will not reversed in the future. According to the
level of uncertainty relating to the results of preclinical and clinical trials and the decisions relating to the
regulatory approvals, variable considerations depending on these events are excluded from the transaction
price as long as the trigger event is not highly probable. When the trigger event occurs, the corresponding
milestone is added to the transaction price. Such adjustments are recorded on a cumulative catch-up basis,
which would affect revenues and net income (loss) in the period of adjustment.
Revenues based on royalties, completion of commercialization steps or co-sharing profit from sales are
recognized when the corresponding sales of products are carried out by the partner.
When a collaboration contract grants a partner an option to acquire a licensed intellectual property (“IP”),
the Company determines the date of the transfer of control over the licensed IP. Depending on the
Company analysis, revenue related to the option fee will be recognized (i) when control over the licensed
IP transfers (payment related to the exercise of the option being therefore considered as a variable
consideration), or, (ii) deferred until the exercise of the option or its expiration period.
When an agreement only promises development services, the Company will recognize the related revenue
when the costs are incurred.
Up-front and milestones payments and fees are recorded as deferred revenue upon receipt or when due,
and may require deferral of revenue recognition to a future period until the Company performs its
obligations under these arrangements. Amounts due by the Company in relation to cost-sharing are
recorded as collaboration liability. Amounts payable to the Company are recorded as accounts receivable
when the Company’s right to consideration is unconditional.
See Note 13 for accounting description of significant agreements.
F-30
Sales
Revenues from sales of pharmaceutical products are presented in Revenue in the group's income
statement. The sales recorded as revenue relate exclusively to sales of Lumoxiti products following the
end of the transition period with AstraZeneca which took place on September 30, 2020.
t)
Net income (expenses) from distribution agreements
When product sales are made by a partner in the context of collaboration or transition agreements, the
Company must determine wheter it acts as agent or principal. A party is recognized as a principal when it
has the ability to conduct the use of the products and to obtain all the residual economic benefits
previously to the transfer of the control of the products to the customers. If the Company is a principal,
sales are recognized as revenue. If the Company is an agent, it recognizes as a gain or a loss, the part of
the revenue it is entitled to, which is the case under the agreement with AstraZeneca in relation to
Lumoxiti (see Note 15). Therefore, income (loss) under the agreement are recognized in the statement of
income (loss) on the line item “Net income (loss) from distribution agreements” until September 30,
2020, end date of the transition period with AstraZeneca.
u)
Government financing for research expenditures
Research tax credit
The research tax credit (Crédit d’Impôt Recherche) (the “Research Tax Credit” or “CIR”) granted by the
French tax authorities in order to encourage Companies to conduct technical and scientific research.
Companies that can justify that these expenses meet the required criteria receive such grants in the form
of a refundable tax credit that can be used for the payment of taxes due for the period in which the
expense was incurred and for the next three years. These grants are presented under other income, in
“government financing for research expenditures” line item in the consolidated statements of income
(loss), as soon as these eligible expenses were conducted.
The Company has benefited from a Research Tax Credit since its inception.
The Company received the reimbursements of the Research Tax Credits for the year 2017 and 2018,
during the year 2018 and 2019 respectively. These reimbursements were made under the European
Community tax rules for small and medium sized enterprises (“SME”) in compliance with the applicable
regulations in effect. Only companies that meet the definition of SME according to European Union
criteria are eligible for early reimbursement of their CIR. Management ensured that the Company was a
SME according to European Union criteria as of December 31, 2017 and 2018, and can therefore benefit
from this early reimbursement. As of December 31, 2019, the Company no longer met the eligibility
criteria for this status. Thus, the CIR for the years 2019 and after will represent a receivable against the
French Treasury which will in principle be offset against the French corporate income tax due by the
company with respect to the three following years. The remaining portion of tax credit not being offset
upon expiry of such a period may then be refunded to the Company.
For the 2020 financial year, the Company again met the criteria meeting the definition of an SME
according to the criteria of the European Union.
The CIR is presented under other income, in “government financing for research expenditures” line item
in the consolidated statements of income (loss) as it meets the definition of government grant as defined
in IAS 20 Accounting for government grants and disclosure of government assistance.
F-31
Subsidies
Government grants are recognized when there is a reasonable assurance that:
•
•
The Company will comply with the conditions attached to the grants; and that
The grants will be received.
A government grant that becomes receivable as compensation for expenses or losses already incurred, or
for the purpose of providing immediate financial support to the Company with no future related costs, is
recognized as other income of the period in which it becomes receivable.
Government grants to subsidize capital expenditures are presented in the statement of financial position as
deferred income and are recognized as income on a straight line basis over the useful life of those assets
that have been financed through the grants.
A non-repayable loan from the government is treated as a government grant when there is a reasonable
assurance that the Company will meet the terms for non-repayment of the loan. When there is no such
assurance, the loan is recorded as a liability under borrowings.
v)
Income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Main
temporary differences are generally associated with the depreciation of property and equipment,
provisions for pension benefits and tax losses carried forward and also with the deferred tax liabilities /
assets generated by the application of IFRS 15 (see Note 2.dd “Adoption of IFRS 15”). Currently enacted
tax rates are used in the determination of deferred income tax.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilized. Due to Company’s early stage of
development, it is not probable that future taxable profit will be available against which the unused tax
losses can be utilized. As a consequence, deferred tax assets are recognized up to deferred tax liabilities.
w)
Earnings (loss) per share
In accordance with IAS 33 Earnings per share, basic income (loss) per share is calculated by dividing the
income (loss) attributable to equity holders of the Group by the weighted average number of outstanding
shares for the period.
Diluted income (loss) per share is measured by dividing the income (loss) attributable to holders of equity
and dilutive instruments by the weighted average number of outstanding shares and dilutive instruments
for the period.
If in the calculation of diluted income (loss) per share, instruments giving deferred rights to capital such
as warrants generates an antidilutive effect, then these instruments are not taken into account.
x)
Other comprehensive income
Items of income and expenses for the period that are recognized directly in equity are presented under
“other comprehensive income.” The items mainly include :
•
Foreign currency translation gain (loss); and
• Actuarial gains and (losses) related to defined benefit obligations.
F-32
y)
Segment information
For internal reporting purposes, and in order to comply with IFRS 8 Operating segments, the Company
performed an analysis of operating segments. Following this analysis, the Company considers that it
operates within a single operating segment being the R&D of pharmaceutical products in order to market
them in the future. All R&D activities of the Company are located in France. Key decision makers (the
executive committee of the Company) monitor the Company’s performance based on the cash
consumption of its activities. For these reasons, the Management of the Group considers it not appropriate
to set up separate business segments in its internal reporting.
In 2018 and 2019 revenue was entirely generated by one customer (AstraZeneca). In 2020, revenue
consisted of revenue from collaboration agreements with AstraZeneca and Sanofi as well as sales of
Lumoxiti in the U.S.
z)
Critical accounting estimates and assumptions
The preparation of the consolidated financial statements under IFRS requires management to make
estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, income and
expenses during the reporting period. The Company bases estimates and assumptions on historical
experience when available and on various factors that it believes to be reasonable under the
circumstances. The Company’s actual results may differ from these estimates under different assumptions
or conditions.
These estimates and judgments involve mainly:
•
•
the accounting for collaboration and licensing agreements: the revenue results primarily
from payments based on several components (e.g., upfront payments, milestone payments)
received in relation to research, collaboration and licensing agreements signed with
pharmaceutical or other companies. When the Company is committed to perform R&D
services, revenue is spread over the period the Company is engaged to deliver these services,
more particularly on the basis of the Company’s inputs to the satisfaction of a performance
obligation relative to the total expected inputs to the satisfaction of that performance obligation.
Milestone payments are dependent upon the achievement of certain scientific, regulatory, or
commercial milestones. These variable payments are recognized when the triggering event has
occurred, there are no further contingencies or services to be provided with respect to that
event, and the counterparty has no right to refund of the payment. The changes in estimate
regarding the completion of the works and the variable consideration relating to the contracts
signed with customers are described in Note 13.
the estimate of the recoverable amount of the acquired and under progress licenses:
impairment tests are performed on a yearly basis for the intangible assets which are not
amortized (such as intangible assets in progress). Amortizable intangible assets are tested for
impairment when there is an indicator of impairment. Impairment tests involve comparing the
recoverable amount of the licenses to their net book value. The recoverable amount of an asset
is the higher of its fair value less costs to sell and its value in use. If the carrying amount of any
asset is below its recoverable amount, an impairment loss is recognized to reduce the carrying
amount to the recoverable amount. The main assumptions used for the impairment test include
(a) the amount of cash flows that are set on the basis of the development and commercialization
plans and budgets approved by Management, (b) assumptions related to the achievement of the
clinical trials and the launch of the commercialization, (c) the discount rate, (d) assumptions on
risk related to the development and (e) for the commercialization, selling price and volume of
sales, Any change in these assumptions could lead to the recognition of an impairment charge
that could have a significant impact on the Company’s consolidated financial statements.
F-33
•
the estimate of the useful life of the acquired licenses: intangible assets are amortized on a
straight line basis over their anticipated useful life. The estimated useful life is the period over
which the asset provides future economic benefits. It is estimated by management and is
regularly revised by taking into consideration the period of development over which it expects
to receive economic benefits such as collaboration revenues, royalties, product of sales, etc.
However, given the uncertainty surrounding the duration of the R&D activities for the
programs in development and their likelihood to generate future economic benefits to the
Company, the estimated useful life of the rights related to these programs is rarely longer than
in
the actual development phase of
commercialization phases, the useful life takes into account the protection of the exclusivity
rights and the anticipated period of commercialization without taking into account any
extension or additional patents. The prospective amendment of the amortization plan of the
monalizumab intangible asset, which is modified according to the estimate ending date of the
Phase II clinical trial is described in Note 6.
the product candidate. When a program
is
3)
Management of financial risks and fair value
The principal financial instruments held by the Company are cash, cash equivalents and marketable
securities. The purpose of holding these instruments is to finance the ongoing business activities of the
Company. It is not the Company’s policy to invest in financial instruments for speculative purposes. The
Company does not utilize derivatives.
The principal risks to which the Company is exposed are liquidity risk, foreign currency exchange risk,
interest rate risk and credit risk.
Liquidity risk
The Company’s cash management is performed by the Finance department, in charge of monitoring the
day-to-day financing and the short-term forecast and enabling the Company to face its financial
commitments by maintaining an amount of available cash consistent with the maturities of its liabilities.
As of December 31, 2020, cash, cash equivalents and short-term investments were €151,637 thousand,
which represents more than a year of cash consumption.
The main characteristics of the financial instruments owned by the Company (including liquidity) are
presented in Note 4.
Foreign currency exchange risk
The Company is exposed to foreign exchange risk inherent in certain subcontracting activities relating to
its operations in the United States, which have been invoiced in U.S. dollars. The Company does not
currently have recurring revenues in euros, dollars or in any other currency. As the Company further
increases its business, particularly in the United States, it is expected to face greater exposure to exchange
rate risk.
The revenue denominated in U.S. dollars has represented approximately 100% of revenue in the years
ended December 31, 2018, 2019 and approximately 88% in the year ended December 31, 2020,
respectively. Payments in U.S. dollars represented approximately 31.9%, 64.1%, 48.4% of the payments
in the years ended December 31, 2018, 2019 and 2020, respectively. In order to cover this risk, the
Company kept in U.S. dollars a part of the consideration received from AstraZeneca in June 2015 and
January 2019. We entirely kept the U.S dollars portion of the proceeds received from our Global
Offering in October 2019.
The Company’s foreign exchange policy does not include the use of hedging instruments.
F-34
Interest rate risk
The Company has very low exposure to interest rate risk. Such exposure primarily involves money
market funds and time deposit accounts. Changes in interest rates have a direct impact on the rate of
return on these investments and the cash flows generated. The Company has no credit facilities. The
repayment flows of the advances from Banque Publique d’Investissement (“BPI France”) and the
borrowings subscribed in 2017 are not subject to interest rate risk.
Credit risk
The credit risk related to the Company’s cash equivalents, short-term investments and non-current
financial assets is not significant in light of the quality of the issuers. The Company deemed that none of
the instruments in its portfolio are exposed to credit risk.
Fair value
The fair value of financial instruments traded on an active market is based on the market rate as of
December 31, 2020. The market prices used for the financial assets owned by the Company are the bid
prices in effect on the market as of the valuation date.
4) Cash, cash equivalents and financial assets
(in thousands of euro)
Cash and cash equivalents
Short-term investments
Cash and cash equivalents and short-term investments
Non-current financial assets
Total cash, cash equivalents and financial assets
2018
152,314
15,217
167,531
35,181
202,711
December 31
2019
202,887
15,978
218,865
37,005
255,869
2020
136,792
14,845
151,637
38,934
190,571
Cash and cash equivalents are mainly composed of current bank accounts, interest-bearing accounts and
fixed-term accounts.
Other non-current financial assets generally include a guarantee of capital at the maturity date (which is
always longer than one year). These instruments are defined by the Company as financial assets at fair
value through profit or loss and classified as non-current due to their maturity.
As of December 31, 2018, 2019 and 2020 the amount of cash, cash equivalents and financials assets
denominated in US dollars amounted respectively to €74,442 thousand , €97,688 thousand and €64,654
thousand
The variation of short-term investments and non-current financial assets for the periods presented, are the
following:
December 31,
2018
Acquisitions
Disposals
Variance of
fair value
through the
consolidated
statement of
income (loss)
Variance of
accrued
interests
Foreign
currency
effect
December
31, 2019
15,217
35,181
50,398
—
—
—
—
481
—
280
15,978
(2,000)
3,585
(2,000)
4,066
237
237
—
280
37,005
52,983
(in thousands of
euro)
Short-term
investments
Non-current
financial assets
Total
F-35
December 31,
2019
Acquisitions
Disposals
Variance of
fair value
through the
consolidated
statement of
income (loss)
Variance of
accrued
interests
Foreign
currency
effect
December
31, 2020
15,978
—
37,005
52,983
3,000
3,000
—
—
—
123
—
(1,256)
14,845
(700)
(372)
—
38,934
(577)
(372)
(1,256)
53,779
(in thousands of
euro)
Short-term
investments
Non-current
financial assets
Total
5) Trade receivables and others
Trade receivables and others are analyzed as follows:
(in thousands of euro)
Other receivables (1)
Accrued receivables excluding rebates related to capital
expenditures
Research tax credit(2)
Other tax credits
Prepaid expenses
VAT refund
Trade account receivables
Prepayments made to suppliers
Refund to be received
Rebate related to capital expenditures(3)
Receivables and others - current
Research tax credit(2)
Receivables and others - non-current
Trade receivables and others - excluding rebates related to
capital expenditures
_________________
Year ended December 31,
2018
108,585
5,539
13,503
538
4,211
2,807
2,522
1,264
43
13,100
152,112
—
—
139,012
2019
544
691
—
333
5,403
1,995
2,816
197
—
6,762
18,741
16,737
16,737
28,716
2020
741
—
—
333
6,833
2,208
10,585
1,114
—
—
21,815
29,821
29,821
51,635
(1) “Other receivables” as of December 31, 2018, mainly related to AstraZeneca as a result of the exercise of the monalizumab exclusive
license option ($100,000 thousand or €87,655 thousand) and option granted on IPH5201 ($24,000 thousand or €20,961 thousand). These
amounts were paid in the first quarter of 2019, see Note 1.1.a and Note 1.1.c for agreements description.
(2) In accordance with the principles described in Note 2.u, the research tax credit (Crédit d’Impôt Recherche or “CIR”) is recognized as other
operating income in the year to which the eligible research expenditure relates. The Company obtained the repayment of the CIR for the
tax year 2018 in the amount of €13,503 thousand in July 2019. The CIR for the tax years 2019 and 2020 amounted respectively to 16,737
thousands and €13,084 thousand . Following the fact that the Company no longer meets the eligibility criteria for the SME status as of
December 31, 2019, the CIR for the tax years 2019 and 2020 will in principle be offset against the French corporate income tax due by the
company with respect to the three following years, or refunded if necessary upon expiry of such a period (see note 2.u).
(3) The rebate refers to a definitive rebate of $7,580 thousand as of December 31, 2019 ($15,000 thousand as of December 31, 2018) granted
by AstraZeneca in connection with the acquisition of Lumoxiti rights. This amount was paid to the Company in April 2020 for an amount
of € 6,975 thousand. This decrease of $7,420 thousand (€6,455 thousand) was based on the final cost figures for the 2019 financial year for
Lumoxiti and invoiced by AstraZeneca. The carrying amount of the intangible asset has been adjusted accordingly (see note 6).
Trade receivables and others have payment terms of less than one year. No valuation allowance was
recognized on trade receivables and others as the credit risk of each of debtors was considered as not
significant.
F-36
6)
Intangible assets
Intangible assets can be broken down as follows:
(in thousands of euro)
January 1, 2018
Acquisitions (amended)(1)
Disposals
Transfers
Depreciation
December 31, 2018(amended) (1)
(in thousands of euro)
January 1, 2019
Acquisitions
Additional considerations
Disposals
Depreciation
Transfers
December 31, 2019
(in thousands of euro)
January 1, 2020
Acquisitions
Additional considerations
Disposals
Depreciation
Impairment
Transfers
December 31, 2020
Purchased
licenses
6,013
43,801 (1)
—
—
(5,630)
44,184
Other intangible
assets
179
405
(64)
—
(175)
345
Purchased
licenses
44,184
—
27,020 (2)
—
(14,353) (3)
—
56,851
Other intangible
assets
345
59
—
—
(149)
(139)
116
Purchased
licenses
56,851
—
3,685 (4)
—
(10,904) (5)
(43,529) (6)
—
6,103
Other intangible
assets
116
264
—
—
(195)
—
—
185
In progress
40,000
—
—
—
—
40,000
In progress
40,000
—
—
—
—
—
40,000
In progress
40,000
—
—
—
—
—
—
40,000
Total
46,192
44,206
(64)
—
(5,805)
84,529
Total
84,529
59
27,020
—
(14,502)
(139)
96,968
Total
96,968
264
3,685
—
(11,099)
(43,529)
—
46,289
(1) This amount mainly includes (i) an upfront payment of €43,501 thousand, less an estimate rebate of €13,050 thousand relating to the rights
acquired from AstraZeneca in 2018 under the Lumoxiti in-licensing agreement and (ii) a €13,050 thousand additional consideration to be
paid to Novo Nordisk A/S following the exercise of the option by AstraZeneca for the monalizumab rights.
(2) This amount includes (i) an additional consideration of €7,000 thousand paid to Orega Biotech in June 2019 in relation to the anti-CD39
program as consideration following the collaboration and option agreement signed in October 22, 2018 with AstraZeneca regarding
IPH5201 (see Note 1.c), (ii) the decrease of the rebate granted by AstraZeneca in connection with the acquisition of Lumoxiti rights for an
amount of 6,455 thousand (see Note 5 and (2) above ), and (iii) an additional consideration of €13,565 thousand paid to AstraZeneca in
January 2020 following the submission to the European Medicines Agency (EMA) of the Marketing Authorization Application (MAA)
relating to the commercialization of Lumoxiti in Europe (see Note 1.2).
(3) This amount includes the amortization of rights related to monalizumab (€4,792 thousand), IPH5201 (€6,831 thousand) and Lumoxiti
(€2,730 thousand).
(4) This amount includes in particular: (i) an amount of 2,685 thousand euros for the two additional payments made to Orega Biotech in April
2020 (2,500 thousand euros) and June 2020 (185 thousand euros) relating to IPH5201 rights following the first patient dosed in Phase 1
clinical trial in Mars 2020 and (ii) an amount of €1,000 thousand paid in October 2020 to Novo Nordisk A / S following the launch of the
first Phase II trial regarding avdoralimab.
(5) This amount includes the amortization of rights relating to monalizumab (€2,844 thousand), IPH5201 (€4,314 thousand) and Lumoxiti
(€3,746 thousand). The amortization relating to Lumoxiti rights relates to the period prior to the decision to return the commercial rights to
AstraZeneca. Impact of the decision on the book value of said rights is presented in note 6 below.
F-37
(6) Following the Company's decision to return the commercial rights to Lumoxiti in the United States and in Europe at the end of November
2020, the rights relating to the intangible asset have been fully impaired for the carrying amount of the intangible asset to the date of the
decision, amounting to €43,529 thousand.
Monalizumab rights under the 2014 monalizumab (NKG2A) Novo Nordisk agreement
At the agreement inception, acquired rights were recorded as intangible asset for an amount of
€7,000 thousand. The Company recorded an additional consideration of €6,325 thousand in 2015 and a
final consideration of $15,000 thousand (€13,050 thousand) due in 2018 (see Note 1.1.a).
Since their acquisition by the Company, monalizumab rights are amortized on a straight-line basis over
the anticipated residual duration of the Phase II trials. The Company has reassessed the anticipated
residual duration of the Phase II trials as of December 31, 2020 and estimated that it would be fully
amortized by early 2023, compared to end of 2021 as estimated as of December 31, 2019, as a result of
the completion of some trials and by modifying the estimated end dates relating to certain cohorts. The
impact of this revision for the fiscal year ended December 31, 2020 amounts to €1,575 thousand.
The net book values of the monalizumab rights were €5,097 thousand and €7,941 thousand as of
December 31, 2020 and December 31, 2019, respectively.
IPH5201 (Anti-CD39) rights acquired from Orega Biotech
On January 4, 2016, the Company and Orega Biotech entered into an exclusive licensing agreement by
which Orega Biotech granted the Company full worldwide rights to its program of first-in-class anti-
CD39 checkpoint inhibitors. The undisclosed upfront payment paid by the Company to Orega Biotech has
been recognized as an intangible asset in the consolidated financial statements for the year ended
December 31, 2016. Criteria relating to the first development milestone were reached in December 2016.
Consequently, the amount of this milestone was recognized as an intangible asset in addition to the initial
payment, for a total of €1.8 million as of December 31, 2019. In June of 2019, the Company also paid
Orega Biotech €7.0 million in relation to the anti-CD39 program as consideration following the
collaboration and option agreement signed on October 22, 2018 with AstraZeneca regarding IPH5201.
Under this agreement, the Company also paid in April and June 2020, respectively €2.5 and €0.2 million
to Orega Biotech following the first Phase I dosing relating to IPH5201.
This asset was amortized on a straight-line basis since November 1, 2018 (corresponding to the effective
beginning date of the collaboration) until the date the Company expected to fulfill its commitment (end of
fiscal year 2020). As of December 31, 2020, these collaboration commitments have all been fulfilled.
Thus, the rights relating to IPH5201 are fully amortized as of December 31, 2020.
The Company may also be obligated to pay Orega Biotech up to €49,000 thousand upon the achievement
of development and regulatory milestones. In addition, the Company will be obligated to pay mid-single
digit to low-teen percentage payments, depending on determinations relating to Orega Biotech’s
intellectual property rights for certain patents, on sublicensing revenues the Company receives pursuant to
its agreement with AstraZeneca relating to IPH5201.
Avdoralimab (IPH5401) (anti-C5aR) rights acquired from Novo Nordisk A/S
At the agreement inception, an upfront payment of €40 million for acquired rights were recorded as
intangible asset. As part of this agreement, an additional amount of €1.0 million was paid in October 2020
to Novo Nordisk A / S following the launch of the first avdoralimab Phase II trial. As avdoralimab is still
in clinical trial, the acquired rights are classified as intangible asset in progress. They were subject to
annual impairment test. No impairment were recorded since inception. These acquired rights will be
amortized when the Company obtains economic benefits.
F-38
According to the agreement, the Company will pay additional payments according to the reach of specific
steps. As of December 31, 2020, according to the uncertainty of these potential future payments, no
liability was recognized.
Development costs incurred by the Company are recognized as research and development expenses.
The main assumptions used for the impairment test are the following:
• Cash flows are set on the basis of the development and commercialization plans and budgets
approved by Management;
• A discount rate of 12%;
• A risk of development is taken into consideration by applying probabilities of success of
reaching future phases of development to cash flows related to each development phases Those
average probabilities of success of R&D projects are based on an article published in Nature
Review Drug Discovery;
•
For the commercialization phase, selling price and sales volume are estimated on the basis of
the potential market and the observed performances of comparable drugs currently on the
market. Decrease in sales volume applied to the forecasted revenue once the related rights fall
off-patent.
In case of failure of the clinical trials in progress, the Company may have to depreciate the intangible
asset corresponding to the avdoralimab rights.
The Company did not identify any reasonable potential variance in the key assumptions that may generate
an impairment.
Sensitivity testing regarding these following assumptions and other assumptions such as: discount rate
(+/- 3%), selling price (+/- 10%) and decrease in sales volume once the related rights fall off-patent (+/-
5%) were performed. These tests did not reveal any impairment.
Avdoralimab does not generate economic benefits yet for the Company. In accordance with IAS 38, it
will be amortized when it generates economic benefits, which can result from:
•
The commercialization the drug candidate; or,
• An out-licensed agreement.
If the Company commercialize the drug product on its own, it will have to determine the amortization
period of the related capitalized rights. It will have to estimate their useful life, considering the date when
they fall off patent. Those capitalized rights will be amortized on a straight line basis during the estimated
useful life.
If the Company entered in an out-licensed agreement, the Company will have to perform an analysis to
determine if the control of the rights are transferred to a third-party, and thus will have to derecognize the
capitalized rights. If the Company conclude that it keeps the control of the rights, it will determine their
useful life and will amortize them on a straight line basis during this useful life.
Lumoxiti rights acquired from AstraZeneca under the 2018 AstraZeneca multi-term agreement
The license by which the Company acquired Lumoxiti rights was initially amortized on a straight-line
basis through July 31, 2031, which corresponds to the expiration of the current composition of matter
patent, not including any additional patent extensions or patents. The net book value of the Lumoxiti
rights was €47,276 thousand and €29,987 thousand as of December 31, 2019 and December 31, 2018,
respectively. This increase in the net book value resulted from (i) the decrease of the rebate granted by
AstraZeneca in connection with the acquisition of Lumoxiti rights for an amount of €6,455 thousand (see
F-39
Note 6), and (ii) an additional consideration of €13,565 thousand paid to AstraZeneca in January 2020
following the submission to the European Medicines Agency (EMA) of the Marketing Authorization
Application (MAA) relating to the commercialization of Lumoxiti in Europe.
End of November 2020, the Company decided to return the marketing rights of Lumoxiti in the United
States and in Europe. Following this decision, the Company applied IAS 36 "Impairment of assets" and
assessed that there was an indication of impairment sufficiently significant to result in the full impairment
of the intangible asset. This depreciation was recognized with regard to the estimate of the recoverable
value of Lumoxiti's intangible assets, based on expected future cash flows, determined using the
marketing plan and budget approved by management, and future expenses to be exposed in particular as
part of the transition plan, which is under negotiation at the date of this report (see note 18).
Thus, on the date of the decision to return the rights, the Lumoxiti rights were fully written down to their
net book value as of October 31, 2020, i.e. €43,529 thousand.
7) Property and equipment
(in thousands of euro)
January 1, 2018
Acquisitions
Disposals
Transfers
Depreciation
December 31, 2018
(in thousands of euro)
December 31, 2018
Impact of 1st application of IFRS 16
January 1, 2019
Acquisitions
Disposals
Transfers
Depreciation
December 31, 2019
(in thousands of euro)
January 1, 2020
Acquisitions
Disposals
Depreciation
Transfers
December 31, 2020
Land and
buildings
Laboratory
equipment
and other
In progress
Total
4,093
—
—
—
(298)
3,795
6,602
725
(22)
30
(1,234)
6,101
34
316
—
(30)
—
320
Of which
finance leases
5,478
—
—
—
(555)
4,923
10,729
1,041
(22)
—
(1,532)
10,216
Land and
buildings
Laboratory
equipment
and other
In progress
Total
Of which
right of use
assets
3,795
1,028
4,823
1,102
(1)
—
(568)
5,356
6,101
69
6,170
1,031
(96)
302
(1,460)
5,947
320
—
320
212
—
(163)
—
369
10,216
1,097
11,313
2,345
(97)
139
(2,028)
11,672
4,923
1,097
6,020
1,102
—
(852)
—
6,270
Land and
buildings
Laboratory
equipment
and other
In progress
Total
Of which
right of use
assets
5,356
1,152
—
(757)
—
5,751
5,947
944
(9)
(1,440)
134
5,576
369
132
—
—
(134)
367
11,672
2,228
(9)
(2,197)
—
11,694
6,270
1,195
—
(1,042)
—
6,423
F-40
8) Trade payables and others
This line item is analyzed as follows:
(in thousands of euro)
Suppliers (excluding payables related to capital expenditures)
Tax and employee-related payables
Other payables
Trade payables and others excluding payables related to capital
expenditures
Payables related to capital expenditures
Payables and others
2018
December 31,
2019
2020
28,576
5,661
425
34,662
56,993
91,655
27,936
6,999
1,111
36,047
13,458
49,504
20,730
8,325
463
29,519
20
29,539
The book value of trade payables and others is considered to be a reasonable approximation of their fair
value.
9) Financial liabilities
This line item was broken down per maturity and is analyzed as follows:
In thousand euros
BPI PTZI IPH41 (1)
Lease liabilities – Real estate property
Property transaction (down-payment)
Lease liabilities – Laboratory equipment
Loans – Equipment
Loans – Building
Total
_____
(1) Interest-free loan
December 31,
2017
Proceeds from
borrowing
Repayments of
borrowings and
lease liabilities
December 31,
2018
1,125
2,239
(386)
1,160
426
1,300
5,864
—
—
—
—
—
—
—
(375)
(894)
152
(173)
(54)
—
(1,343)
750
1,345
(235)
987
372
1,300
4,522
In thousand euros
BPI PTZI IPH41 (1)
Lease liabilities –
Real estate property
Property transaction
(down-payment)
Lease liabilities –
Building "Le
Virage"
Lease liabilities –
Premises Innate Inc
Lease liabilities –
Laboratory
equipment
Impact of
first
application
of IFRS16
(non cash)
—
December
31, 2018
750
January 1,
2019
750
Proceeds
from
borrowing
—
1,345
(234)
—
—
1,345
(234)
—
—
987
1,099
1,099
—
—
—
987
F-41
—
—
—
—
—
Proceeds
from lease
liabilities
and other
non cash
effects
Repayment
s of
borrowings
and lease
liabilities
December
31, 2019
—
—
—
623
496
(300)
450
(927)
418
161
(74)
(285)
1,437
—
496
—
(172)
815
Lease liabilities –
Vehicles
Loans – Equipment
Loans – Building
Total
_____
(1) Interest-free loan
—
372
1,300
4,522
69
—
—
1,168
69
372
1,300
5,690
—
—
13,900
13,900
—
—
—
1,119
(32)
(53)
(374)
(1,982)
37
319
14,826
18,723
December 31,
2019
Proceeds from
borrowing
Proceeds from
lease liabilities
and other non
cash effects
Repayments of
borrowings
and lease
liabilities
December 31,
2020
450
—
418
(74)
1,437
496
815
37
—
319
14,826
18,723
—
1,360
—
—
—
—
—
—
—
—
1,360
—
94
—
—
(300)
150
—
1,454
(418)
74
—
—
1,114
(164)
2,387
—
—
—
41
—
—
1,249
(49)
(176)
(16)
—
(57)
(1,139)
(2,245)
447
639
21
41
262
13,687
19,087
In thousand euros
BPI PTZI IPH41 (1)
BPI Refundable advance -
FORCE
Lease liabilities – Real estate
property
Property transaction (down-
payment)
Lease liabilities – Building
"Le Virage"
Lease liabilities – Premises
Innate Inc
Lease liabilities – Laboratory
equipment
Lease liabilities – Vehicles
Lease liabilities - Printers
Loans – Equipment
Loans – Building
Total
(1) Interest-free loan
In 2013, the Company was granted an interest-free loan for innovation (“PTZI”) by BPI France
relating to the program lacutamab IPH4102 for an amount of €1,500 thousand.
Finance lease obligations relate primarily to real estate property in relation to the acquisition in 2008 of
the Company’s headquarters and main laboratories. They are presented in the above table net of the cash
collateral paid to Sogebail, the lessor.
On August 11, 2020, the Company signed a financing contract with Bpifrance Financement as part of the
program set up by the French government to help develop a therapeutic solution with a preventive or
curative aim against COVID-19. This funding, for a maximum amount of € 6.8m, consists of (i) an
advance repayable only in the event of technical and commercial success and (ii) a non-repayable grant.
This funding will be received in four successive installments. The first tranche of 1.7 million euros was
paid at signing, and the other three tranches will be received after successful completion of certain clinical
milestones, particularly around Phase 2 of the FORCE trial. The portion relating to the repayable advance
included in this first tranche amounts to €1,454 thousand as of December 31, 2020.
F-42
On July 3, 2017, the Company borrowed from the Bank “Société Générale” in order to finance the
construction of its future headquarters. This loan amounting to a maximum of €15,200 thousand will be
raised during the period of the construction in order to pay the supplier payments as they become due. As
of December 31, 2018 and 2019, the loan was raised at an amount of €1,300 thousand.
The loan release period was limited to August 30, 2019. On August 30, 2019, the Company drew down
the remaining portion of the €15,200 thousand loan granted, for an amount of €13,900 thousand. The
reimbursement of the capital has begun in August 30, 2019 and will proceed until August 30, 2031 (12
years). As of December 31, 2020, the remaining capital of the loan amounted to €13,687 thousand. The
Company authorized collateral over
to
€15,200 thousand. The security interest on the pledge financial instruments will be released in accordance
with the following schedule: €4,200 thousand in July 2024, €5,000 thousand in July 2027 and
€6,000 thousand in July 2031.
financial “Société Générale”
instruments amounting
This loan bears a fixed interest rate of 2.01%. It is subject to a covenant based on the assumption that the
total cash, cash equivalents and current and non-current financial assets are at least equal to principal as of
financial year end.
In thousand euros
Current financial liabilities
BPI PTZI IPH41
BPI Refundable advance - FORCE
Lease finance obligations – Real estate property
Lease finance obligations – Rent Le Virage
Lease liabilities – Premises Innate Inc
Lease finance obligations – Laboratory equipment
Lease liabilities – Vehicles
Lease liabilities - Printers
Loans - Equipment
Loans - Building
Total – Current financial liabilities
In thousand euros
Non-Current financial liabilities
BPI PTZI IPH41(1)
BPI Refundable advance - FORCE
Lease finance obligations – Real estate property
Lease finance obligations – Building Le Virage
Lease liabilities – Premises Innate Inc
Lease finance obligations – Laboratory equipment
Lease finance obligations – Vehicles
Lease liabilities - Printers
Loans - Equipment
Loans - Building
Total – Non-Current financial liabilities
Year ended December 31,
2019
2020
2018
300
—
766
—
—
187
—
—
54
40
1,347
300
—
344
77
25
175
16
—
55
1,139
2,130
150
—
—
511
72
175
13
6
55
1,161
2,142
Year ended December 31,
2019
2020
2018
450
—
344
—
—
800
—
—
318
1,260
3,175
150
—
—
1,360
471
640
21
—
264
13,687
16,593
—
1,454
—
1,876
375
463
8
35
208
12,526
16,945
F-43
The table below shows the schedule for the contractual flows (being principal and interest payments):
(in thousands of euro)
BPI PTZI IPH41
BPI Refundable advance - FORCE
Lease finance obligations – Real estate property
Down-payment
Lease finance obligations – Rent Le Virage
Lease liabilities – Premises Innate Inc.
Lease liabilities – Laboratory equipment
Lease liabilities – Vehicles
Lease liabilities - Printers
Loans – Equipment
Loan – Building
Total
≤ 1 year
2 to 5 years
included
≥ 5 years
Total
150
—
—
—
558
79
179
13
7
57
1,427
2,470
—
1,454
—
—
1,955
339
468
8
36
213
5,706
10,179
—
—
—
—
—
53
—
—
—
—
7,965
8,018
150
1,454
—
—
2,513
471
647
21
43
270
15,098
20,667
10) Employee benefits
Defined benefit obligations
(in thousands of euro)
Allowance for retirement defined benefit
Allowance for seniority awards
Total Defined benefit obligations
Year ended December 31,
2018
2019
2020
3,282
415
3,697
3,281
479
3,760
3,713
463
4,177
French law requires payment of a lump sum retirement indemnity to employees based on years of service
and annual compensation at retirement. Benefits do not vest prior to retirement. The Company pays for
this defined benefit plan. It is calculated as the present value of estimated future benefits to be paid,
applying the projected unit credit method whereby each period of service is seen as giving rise to an
additional unit of benefit entitlement, each unit being measured separately to build up the final.
On March 24, 2016, the Company entered into an internal labor agreement with the employees
representatives whereby the Company is committed to paying a seniority award after 15 years and 20
years of employment. This award is paid on the anniversary date. A similar award existed for employees
having a seniority of 10 years but was not booked due to its insignificant amount. As such, in 2016 the
Company recorded a provision for seniority awards and a corresponding charge included in “Personnel
costs other than share-based payments” (see Note 14) other than payments in shares. These awards meet
the definition of other long-term benefits under IAS 19. This provision is determined by an external
actuary firm based on the assumptions disclosed hereafter and amounts to €463 thousand as of December
31, 2020 (€479 thousand as of December 31, 2019).
F-44
The main actuarial assumptions used to evaluate retirement benefits are the following:
Economic assumptions
Discount rate (iBoxx Corporate AA) for retirement
Annual rate of increase in wages
Demographical assumptions
Type of retirement
Annual mobility rate
Rate of contributions
Rate of wages costs
Age at retirement
- Executives
- Non executives
Mortality table
Annual turnover by tranche of age
16-24 years
25-29 years
30-34 years
35-39 years
40-44 years
45-49 years
+50 years
Year ended December 31,
2019
2020
2018
1.80%
4.50%
1.05%
3.00%
0.50%
3.00%
At the initiative
of the employee
2.0%
45.20%
23.29%
At the initiative
of the employee
1.90%
47.07%
22.54%
At the initiative
of the employee
2.6%
45.17%
22.06%
64 years
62 years
TH-TF 00-02
All personnel
5.0%
3.0%
2.5%
2.0%
1.5%
1.0%
0%
64 years
62 years
TH-TF 00-02
All personnel
5.0%
3.5%
2.5%
2.0%
1.5%
1.0%
0%
64 years
62 years
TH-TF 00-02
All personnel
6.0%
5.0%
3.7%
3.0%
2.0%
1.0%
0%
Changes in the projected benefit obligation for the periods presented were as follows (in thousands of
euro):
As of January 1, 2018
Service cost
Interest costs
Actuarial loss
As of December 31, 2018
Service cost
Interest costs
Actuarial gain
As of December 31, 2019
Service cost
Interest costs
Actuarial loss
As of December 31, 2020
F-45
2,621
434
43
599
3,697
630
55
(622)
3,760
252
(35)
200
4,177
There is no asset covering the defined benefit obligations.
An increase/decrease of +/- 50 basis point of the discount rate would result in a decrease/increase of the
total benefit obligation of €328 thousand.
The amounts recognized as an expense linked to defined contributions plans amounted to €1,277
thousand, €1,375 thousand and €1,420 thousand in the years ended December 31, 2018, 2019 and 2020,
respectively.
11) Share capital and share base payments
a)
Share capital
The Company manages its capital to ensure that the Company will be able to continue as a going concern
while maximizing the return to shareholders through the optimization of the debt and equity balance.
We have never declared or paid any dividends on our ordinary shares. We do not anticipate paying cash
dividends on our equity securities in the foreseeable future and intend to retain all available funds and any
future earnings for use in the operation and expansion of our business, given our state of development.
As of December 31, 2020, the Company’s share capital amounted to €3,950,048 divided into (i)
78,986,490 ordinary shares, each with a nominal value of €0.05, (ii) 6,881 “2016” free preferred shares,
each with a nominal value of €0.05 and (iii) 7,581 “2017” free preferred shares, each with a nominal
value of €0.05, respectively fully paid up.
Share capital does not include BSAs, BSAAR,AGAs and AGAPs that have been granted to certain
investors or natural persons, both employees and non-employees of the Company, but not yet exercised.
In October 21, 2019 and December 30, 2019, the retention period for the “2016 free preferred shares” has
ended. The number of ordinary shares to which the conversion of one preferred share entitle has been
determined according to the fulfillment of the performance criteria. Holders of “2016” preferred shares”
are entitled to vote at our shareholders’ meetings, to dividends and to preferential subscription rights, on
the basis of the number of ordinary shares to which they are entitled if they convert their preferred shares.
The Group issued preferred shares “2017 free preferred shares” which will become convertible into
ordinary shares following a vesting period of one year and a retention period of two years if the
performance criteria and presence are met at the end of the retention period. The number of ordinary
shares to which the conversion of one preferred share will entitle will be determined according to the
fulfillment of the performance criteria. During the retention period, holders of the 2017 preferred shares
are entitled to vote the general shareholders’ meetings, to dividends and to preferential subscription rights,
as if they held the same number of ordinary shares as their number of vested 2017 free preferred shares.
The 2017 preferred shares are not transferable during the retention period except under certain
circumstances. After the end of the retention period, holders of all of preferred shares that have not yet
converted them into our ordinary shares, are entitled to vote at our shareholders’ meetings, to dividends
and to preferential subscription rights, on the basis of the number of ordinary shares to which they are
entitled if they convert their preferred shares.
The table below presents the historical changes in the share capital of the Company as of December 31,
2018, 2019 and 2020:
F-46
Date
September 20,
2018
October 25, 2018
October 25, 2018
November 29, 2018
Nature of the Transactions
January 1, 2018
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
ordinary shares to AstraZeneca
Share issuance costs
Capital increase by issuance of
common shares (Exercise of
shares warrants)
Number of
Share
Capital
2,880,352
Share
premium
234,874,392
Common
shares
57,600,100
Preferred
shares
Nominal
value
6,931
€0.05
1,103
(1,103)
22,055
313,025
62,291,975
6,260,500
—
(48,078)
—
2,500
108,125
50,000
—
—
—
—
—
€0.05
€0.05
—
€0.05
—
December 31, 2018 Share based payments
—
2,706,910
—
December 31, 2018
3,196,979
299,932,221
63,932,655
6,931
€0.05
Date
February 8, 2019
April 18, 2019
July 5, 2019
July 17, 2019
October 21, 2019
October 21, 2019
October 22, 2019
December 31, 2019
Nature of the Transactions
January 1, 2019
Capital increase by issuance of
common shares (exercise of
share warrants)
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
common shares (exercise of
share warrants)
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
ordinary shares
Share issuance costs
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
common shares (conversion of
preferred shares in common
shares)
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
December 31, 2019
December 31, 2019 Share based payments
Number of
Share
Capital
3,196,979
Share
premium
299,932,221
Common
shares
63,932,655
Preferred
shares
Nominal
value
6,931
€0.05
38
1,493
750
—
€0.05
5,904
(5,904)
110,500
7,581
€0.05
1,250
43,000
25,000
3,328
(3,328)
66,559
718,750
66,459,716
14,375,000
—
(621,121)
—
2,500
(2,500)
50,000
—
—
—
—
—
€0.05
€0.05
€0.05
—
€0.05
32
(32)
650
(5)
€0.05
12,500
(12,500)
250,000
—
3,825,973
—
—
—
€0.05
—
December 31, 2019
3,941,281
369,617,017
78,811,114
14,507
€0.05
(1) Share issuance costs representing incremental expenses directly attributable to the offering of new shares in the IPO on the Nasdaq and in
the European Private Placement (together the “Global Offering”) were recorded through equity for an amount of €621 thousand. They
consist mainly of legal, financial, accounting and printing fees associated with drafting and filing the registration statement of Innate
Pharma. The other incremental costs incurred in the Global Offering were expensed for an amount of €2,150 thousand.
F-47
Date
January 15, 2020
January 27, 2020
July 7, 2020
July 13, 2020
September 11,
2020
September 24,
2020
December 31, 2020
December 31, 2020
Nature of the Transactions
January 1, 2019
Capital increase by issuance of
common shares (exercise of
share warrants)
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
common shares (exercise of
share warrants)
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Capital increase by issuance of
common shares (definitive
acquisition of free shares )
Number of
Share
Capital
3,941,281
Share
premium
369,617,017
Common
shares
78,811,114
Preferred
shares
Nominal
value
14,507
€0.05
75
2,985
1,500
4,283
(4,283)
85,650
1,250
43,000
25,000
2,869
(2,869)
57,376
—
—
—
—
€0.05
€0.05
€0.05
€0.05
32
(32)
650
(5)
€0.05
226
(226)
4,550
(35)
€0.05
32
(32)
650
(5)
€0.05
Share based payments
—
2,475,422
—
—
—
December 31, 2020
3,950,048
372,130,982
78,986,490
14,462
€0.05
Holding by the Company of its own shares
The Company held 18,575 of its own shares as of December 31, 2020.
b)
Share based payments
The Company has issued BSAs, BSAARs, stock options, AGAs and AGAPs as follows:
Date
Types
Number of
warrants
issued as of
12/31/2018
Number of
warrants
void as of
12/31/2018
Number of
warrants
exercised
as of
12/31/2018
Number of
warrants
outstanding
as of
12/31/2018
Maximum
number of
shares to
be issued as
of
12/31/2018
Exercise
price per
share
BSAAR 2011
650,000
—
395,000
255,000
255,000
146,050
1,050,382
—
2,720
83,700
1,940
62,350
1,045,722
62,350
1,045,722
€ 2.04
€ 2.04
€ 7.20
September 9,
2011
May 27, 2013
July 1, 2015
October 21, 2016
BSAAR 2012
BSAAR 2015
AGAP
Management
2016-1
2,000
450
—
1,550
310,000
—
F-48
October 21, 2016
October 21, 2016
October 21, 2016
AGAP
Employees
2016-1
AGA
Management
2016-1
AGA Employees
2016-1
2,486
179
—
2,307
461,400
50,000
—
—
50,000
50,000
99,932
1,162
98,770
—
—
AGAP 2016-2
3,000
—
—
—
3,000
600,000
—
250,000
250,000
250,000
149,943
4,965
144,978
AGA Bonus 2017
28,556
6,501
22,055
5,725
2,400
144
400
—
—
—
—
—
—
5,581
558,100
2,000
200,000
December 30,
2016
December 30,
2016
December 30,
2016
September 20,
2017
April 3, 2018
April 3, 2018
April 3, 2018
July 3, 2018
November 20,
2018
November 20,
2018
July 29, 2011
July 17, 2013
July 16, 2014
April 27, 2015
July 1, 2015
September 20,
2017
AGA
Management
2016-2
AGA Employees
2016-2
AGAP
Employees 2017
AGAP
Management
2017
AGA Employees
2017
AGA Bonus
Management
2018
AGA Perf
Employees 2018
AGA Perf
Management
2018
BSA 2011
BSA 2013
BSA 2014
BSA 2015-1
BSA 2015-2
BSA 2017
Total as of
December 31,
2018
114,500
4,000
—
110,500
110,500
67,028
327,500
—
—
—
67,028
67,028
—
327,500
327,500
260,000
30,000
—
230,000
230,000
225,000
237,500
150,000
70,000
14,200
37,000
—
—
—
—
—
—
133,060
191,140
75,000
—
—
91,940
46,360
75,000
70,000
14,200
91,940
46,360
75,000
70,000
14,200
€ 1.77
€ 2.36
€ 8.65
€ 9.59
€ 14.05
—
37,000
37,000
€ 11.00
3,943,202
50,521
1,145,643
2,747,038
4,862,100
—
—
—
—
—
—
—
—
—
—
—
—
—
Date
Types
Number of
warrants
issued as of
12/31/2019
Number of
warrants
void as of
12/31/2019
Number of
warrants
exercised
as of
12/31/2019
Number of
warrants
outstanding
as of
12/31/2019
Sept. 9, 2011
May 27, 2013
July 1, 2015
BSAAR 2011
BSAAR 2012
BSAAR 2015
650,000
146,050
1,050,382
—
—
2,720
395,000
84,450
1,940
255,000
61,600
1,045,722
Maximum
number of
shares to
be issued
as of
12/31/2019
255,000
61,600
1,045,722
Exercise
price per
share (in €)
€ 2.04
€ 2.04
€ 7.20
F-49
October 21, 2016
October 21, 2016
October 21, 2016
December 30,
2016
December 30,
2016
April 3, 2018
April 3, 2018
April 3, 2018
July 3, 2018
November 20,
2018
November 20,
2018
January 14, 2019
April 29, 2019
July 3, 2019
November 4,
2019
November 4,
2019
July 29, 2011
July 17, 2013
July 16, 2014
April 27, 2015
July 1, 2015
September 20,
2017
AGAP
Management
2016-1
AGAP
Employees
2016-1
AGA
Management
2016-1
AGAP
Management
2016-2
AGA
Management
2016-2
AGAP
Employees
2017-1
AGAP
Management
2017-1
AGA Employees
2017
AGA Bonus
2018-1
AGAP Perf
Employees
2018-1
AGAP Perf
Management
2018-1
AGA Employees
2018
AGA New
Members 2017-1
AGA Bonus
2019-1
AGAP 2019
Employees 2019
AGAP 2019
Management
2019
BSA 2011-2
BSA 2013
BSA 2014
BSA 2015-1
BSA 2015-2
BSA 2017
Total as of
December 31,
2019
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,000
550
—
1,450
188,500
2,486
251
5
2,230
289,900
50,000
—
50,000
—
—
3,000
—
—
3,000
333,000
250,000
—
250,000
—
—
5,725
386
2,400
400
—
—
114,500
4,000
110,500
67,028
469
66,559
5,339
533,900
2,000
200,000
—
—
—
—
327,500
20,000
—
307,500
307,500
260,000
30,000
—
230,000
230,000
90,650
5,000
25,000
57,376
—
—
546,700
13,900
355,000
225,000
237,500
150,000
70,000
14,200
37,000
—
—
—
—
—
—
—
—
—
—
—
85,650
85,650
25,000
25,000
57,376
57,376
532,800
532,800
—
355,000
355,000
158,060
191,140
75,000
—
—
66,940
46,360
75,000
70,000
14,200
66,940
46,360
75,000
70,000
14,200
€ 1.77
€ 2.36
€ 8.65
€ 9.59
€ 14.05
—
37,000
37,000
€ 11.00
4,739,497
77,676
1,382,654
3,279,167
4,810,448
F-50
Number of
warrants
issued as of
12/31/2020
Number of
warrants
void as of
12/31/2020
Number of
warrants
exercised
as of
12/31/2020
Number of
warrants
outstanding
as of
12/31/2020
650,000
146,050
1,050,382
2,000
2,486
50,000
3,000
—
—
2,720
550
251
—
—
395,000
85,950
1,940
—
50
50,000
—
255,000
60,100
1,045,722
1,450
2,185
—
3,000
Maximum
number of
shares to
be issued
as of
12/31/2020
255,000
60,100
1,045,722
188,500
284,050
—
333,000
Exercise
price per
share (in €)
€ 2.04
€ 2.04
€ 7.20
€—
€—
€—
€—
250,000
—
250,000
—
—
5,725
833
2,400
800
—
—
4,892
489,200
1,600
160,000
April 3, 2018
AGA Employees
2017
114,500
4,000
110,500
67,028
469
66,559
—
—
—
—
Date
Types
Sept. 9, 2011
May 27, 2013
July 1, 2015
October 21, 2016
October 21, 2016
October 21, 2016
December 30,
2016
December 30,
2016
April 3, 2018
April 3, 2018
BSAAR 2011
BSAAR 2012
BSAAR 2015
AGAP
Management
AGAP
Employees
AGA
Management
AGAP
Management
AGA
Management
2016-2
AGAP
Employees
2017-1
AGAP
Management
2017-1
July 3, 2018
November 20,
2018
November 20,
2018
January 14, 2019
April 29, 2019
July 3, 2019
AGA Bonus
2018-1
AGAP Perf
Employees
2018-1
AGAP Perf
Management
2018-1
AGA Employees
2018
AGA New
Members 2017-1
AGA Bonus
2019-1
November 4,
2019
AGAP 2019
Employees 2019
November 4,
2019
July 13, 2020
August 5, 2020
AGAP 2019
Management
2019
AGA Bonus
2020-1
AGA Perf
Employees
2020-1
327,500
85,000
—
242,500
242,500
260,000
60,000
—
200,000
200,000
90,650
5,000
85,650
—
—
25,000
57,376
—
—
—
25,000
25,000
57,376
—
—
546,700
86,100
—
460,600
460,600
355,000
30,000
—
325,000
325,000
79,861
—
—
79,861
79,861
766,650
70,540
—
696,110
696,110
F-51
—
—
—
—
—
—
—
—
—
—
—
—
—
—
August 5, 2020
July 21, 2020
July 29, 2011
July 17, 2013
July 16, 2014
April 27, 2015
July 1, 2015
September 20,
2017
AGA Perf
Management
2020-1
Stock Options
2020-1
BSA 2011-2
BSA 2013
BSA 2014
BSA 2015-1
BSA 2015-2
BSA 2017
Total as of
December 31,
2020
710,000
—
—
710,000
710,000
102,000
72,000
—
30,000
30,000
225,000
237,500
150,000
70,000
14,200
37,000
—
—
—
—
—
—
183,060
191,140
75,000
—
—
41,940
46,360
75,000
70,000
14,200
41,940
46,360
75,000
70,000
14,200
—
37,000
37,000
€ 11.00
—
—
€ 1.77
€ 2.36
€ 8.65
€ 9.59
€ 14.05
6,398,008
418,263
1,552,225
4,427,520
5,869,143
AGA
Details of AGA
Date of grant
(Board of
Directors)
Vesting period
(years)
Non
transferability
period
Number of free
shares granted
Share entitlement
per free share
Grant date share
fair value
Expected
dividends
Performance
conditions
Expected
turnover (yearly
basis)
Volatility
Fair value per
AGA
AGAP
Management
2016-1
AGAP
Employees
2016-1
AGA
Management
2016-1
AGA Employees
2016-1
AGAP
Management
2016-2
October 21,
2016
October 21,
2016
October 21,
2016
October 21,
2016
October 21,
2016
1 year
1 year
3 years
1 year
1 year
2 years after the
vesting period
end
2 years after the
vesting period
end
None
2 years after the
vesting period
end
2 years after the
vesting period
end
2,000
2,486
50,000
99,932
3,000
(1)
130
(1)
130
1
1
111
(2)
€10.87
€10.87
€10.87
€10.87
€12.73
None
Yes
5%
40%
None
Yes
5%
40%
None
None
—
—
None
None
5%
—
None
Yes
9%
40%
€911
€911
€10.55
€10.55
€956
In October 21, 2019 and December 30, 2019, the retention period for the “2016 free preferred shares” has
ended. The number of ordinary shares to which the conversion of one preferred share entitle has been
determined according to the fulfilment of the performance criteria. Holders of “2016” preferred shares”
F-52
are entitled to vote at our shareholders’ meetings, to dividends and to preferential subscription rights, on
the basis of the number of ordinary shares to which they are entitled if they convert their preferred shares.
Date of grant (Board of
Directors)
Vesting period (years)
Non transferability
period
Number of free shares
granted
Share entitlement per
free share
Grant date share fair
value
Expected dividends
Performance conditions
Expected turnover
(yearly basis)
Volatility
Fair value per AGA
Date of grant (Board of
Directors)
Vesting period (years)
Non transferability
period
Number of free shares
granted
Share entitlement per
free share
Grant date share fair
value
Expected dividends
Performance conditions
Expected turnover
(yearly basis)
Volatility
Fair value per AGA
AGA
Management
2016-2
December 30,
2016
3 years
None
AGA Employees
2016-2
AGA Bonus
2017
AGA Employee
2017
AGAP
Employees
2017-1
December 30,
2016
1 year
2 years after the
vesting period
end
September 20,
2017
1 year
1 year after the
vesting period
end
April 3, 2018
April 3, 2018
1 year
1 year after the
vesting period
end
1 year
2 years after the
vesting period
end
250,000
149,943
114,500
28,556
5,725
1
1
1
1
100
€12.73
€12.73
None
None
—
—
€14.61
None
None
5%
—
€10.55
€5.52
None
Yes
4
55
€5.83
€10.90
€5.52
None
None
—%
—%
€10.30
None
Yes
5%
55%
€90
AGAP
Management
2017
AGA Bonus
2018
AGA Perf
Employees 2018
April 3, 2018
July 3, 2018
1 year
2 years after the
vesting period
end
1 year
1 year after the
vesting period
end
AGA Perf
Management
2018
November 20,
2018
3 years
AGA New
Members 2017-1
April 29, 2019
3 years
November 20,
2018
3 years
None
None
None
2,400
100
€5.52
None
Yes
11%
55%
€90
67,028
327,500
260,000
25,000
1
1
1
1
€8.00
€8.00
€5.74
None
Yes
4%
45%
None
Yes
10%
45%
€3.81
€3.81
None
No
10%
—
€5.74
€5.06
None
Yes
—
—
€4.69
F-53
Date of grant (Board of
Directors)
Vesting period (years)
Non transferability
period
Number of free shares
granted
Share entitlement per
free share
Grant date share fair
value
Expected dividends
Performance conditions
Expected turnover
(yearly basis)
Volatility
Fair value per AGA
Date of grant (Board of
Directors)
Vesting period (years)
Non transferability
period
Number of free shares
granted
Share entitlement per
free share
Grant date share fair
value
Expected dividends
Performance conditions
Expected turnover
(yearly basis)
Volatility
Fair value per AGA
AGA Employees
2018
AGA Bonus
2019-1
AGA Perf
Employees 2019
January 14,
2019
1 year
1 year after the
vesting period
end
July 3, 2019
1 year
1 year after the
vesting period
end
AGA Perf
Management
2019
November 4,
2019
3 years
November 4,
2019
3 years
None
None
AGA Bonus
2020
July 13, 2020
1 year
1 year after the
vesting period
end
90,650
57,376
546,700
355,000
79,861
1
€7.31
None
No
4.03%
N/A
€7.31
1
1
1
1
€5.90
None
No
—
—
€5.72
€3.13
€3.13
€6.40
None
Yes
10%
45%
None
Yes
10%
45%
€3.13
€3.13
None
No
—%
—%
€6.40
AGA Perf
Employees
2020-1
AGA Perf
Management
2020-1
August 5, 2020 August 5, 2020
3.5 years
3.5 years
None
None
769,202
710,000
1
€2.94
None
Yes
10.00%
45.00%
€2.94
1
€2.94
None
Yes
10.00
45.00
€2.94
F-54
Change in Number of AGAs Outstanding
Number of AGAs
Balance at beginning of period
Granted during the period
Forfeited during the period
Exercised during the period
Expired during the period
Balance at end of period
Breakdown of the Closing Balance
Number of AGAs
AGAP Management 2016-1
AGAP Employees 2016-1
AGA Management 2016-1
AGAP 2016-2
AGA Management 2016-2
AGA Bonus 2017
AGA Employees 2017
AGAP Employees 2017
AGAP Management 2017
AGA Bonus 2018
AGAP Perf Employees 2018
AGAP Perf Management 2018
AGA Employees 2018
AGA New Members 2017-1
AGA Bonus 2019-1
AGA Perf Employees 2019-1
AGA Perf Management 2019-1
AGA Bonus 2020
AGA Perf Employees 2020-1
AGA Perf Management 2020-1
TOTAL
Year ended December 31,
2018
331,910
777,153
(37,542)
(22,055)
—
1,049,466
2019
1,049,466
1,074,726
(39,783)
(477,064)
—
1,607,345
2020
1,607,345
1,556,511
(268,587)
(143,071)
—
2,752,198
Year ended December 31,
2018
2019
2020
Outstanding
Outstanding
Outstanding
1,550
2,307
50,000
3,000
250,000
—
110,500
5,581
2,000
67,028
327,500
230,000
—
—
—
—
—
—
—
—
1,049,466
1,450
2,230
—
3,000
—
—
—
5,339
2,000
—
307,500
230,000
85,650
25,000
57,376
532,800
355,000
—
—
—
1,607,345
1,450
2,185
—
3,000
—
—
—
4,892
1,600
—
242,500
200,000
—
25,000
—
460,600
325,000
79,861
696,110
710,000
2,752,198
The fair value of granted free shares is based on the closing price of the Company’s share at grant date,
reduced when necessary by an estimated turn-over rate. This estimated fair value is recognized as
operating expenses on a straight-line basis over the vesting period.
The fair value of granted free shares is based on the closing price of the Company’s share at grant date,
reduced when necessary by an estimated turn-over rate. This estimated fair value is recognized as
operating expenses on a straight-line basis over the vesting period.
F-55
AGA Management 2016-1 / AGA Management 2016-2 / AGA Employees 2016-1 / AGA Employees 2016-2
Expenses related to those plans were €1,392 thousand and €1,351 thousand for the financial years ended
December 31, 2018 and 2019 , respectively. These instruments were definitively acquired during the 2019
financial year. Consequently, no expense relating to these plans was recognized during the financial year
ended December 31, 2020.
AGA 2017-1 (Employees)
Expenses were €456 thousand and €152 thousand for the financial year ended December 31, 2018 and
2019, respectively. These instruments were definitively acquired during the 2019 financial year.
Consequently, no expense relating to these plans was recognized during the financial year ended
December 31, 2020.
Free preferred shares convertible into ordinary shares: AGAP Management 2016-1 / AGAP Employees
2016-1 / AGAP Management 2016-2 / AGAP Management 2017 / AGAP Employees 2017
AGAP Management 2016-1, 2016-2 and AGAP Employees 2016-1 are subject to internal and share price
conditions. AGAP Management 2017-1 and AGAP Employees 2017-1 are subject to share value
condition.
The fair value of these free preferred shares is based on a third-party valuation report. The valuation
method used to estimate the fair value of these free preferred shares is presented below:
•
Estimation of the expectation of gain associated with internal and share price conditions, made
on the basis of a Capital Asset Pricing (“CAPM”) model of the share price using a Monte Carlo
approach;
• Adjustment of the estimation by applying expected turnover rates;
Changes in internal conditions are taken into account in the revision of the estimated number of free
shares expected to vest during the vesting period.
The Company has recognized an expense over a period of one year on a straight-line basis, this period
being the vesting period. Expenses were , €567 thousand and €252 thousand for the financial year ended
December 31, 2018 and 2019, respectively.
AGA Bonus 2017 and AGA Bonus 2018
AGA Bonus 2017, and 2018 were granted to the Executive members Committee who opted for these
compensation plans. For each recipient, the number of shares definitely acquired is equal to the cash
equivalent of 50% of the annual variable compensation increased by a 30% premium. In the event of an
over-performance (i.e. achieved target above 100%), the surplus is paid in cash.
Expenses were €208 thousand and €190 thousand for the financial years ended December 31, 2018 and
2019.
Free performance shares 2018 (AGA Perf Employees 2018 and AGA Perf Management 2018)
Free performance shares granted in 2018 are subject to share price conditions and a vesting kicker
triggered by the performance of an internal condition, which is the success of certain clinical trials.
The fair value of these free performance shares is based on a third-party valuation report. The valuation
method used to estimate the fair value of these free performance shares is presented below:
•
Estimation of the expectation of gain associated with internal and share price conditions, made
on the basis of a CAPM model of the share price using a Monte Carlo approach;
• Adjustment of the estimation by applying expected turnover rates.
F-56
Changes in internal conditions are taken into account in the revision of the estimated number of free
performance shares expected to vest during the vesting period.
Expenses were €84 thousand, €782 thousand and €618 thousand for the financial years ended December
31, 2018, 2019 and 2020, respectively
AGA 2018-1 (Employees)
Expenses were €579 thousand and €23 thousand for the financial years ended December 31, 2019 and
2020, respectively.
AGA 2017-1 Management (New Members)
Expenses were €29 thousand and €43 thousand for the financial years ended December 31, 2019 and
2020, respectively.
Free performance shares 2019 (AGA Perf Employees 2019-1 / AGA Perf Management 2019)
Free performance shares granted in 2019 are subject to share price conditions and a vesting kicker
triggered by the performance of an internal condition, which is Lumoxiti's market penetration rate in the
United States.
The fair value of these free performance shares is based on a third-party valuation report. The valuation
method used to estimate the fair value of these free performance shares is presented below:
•
Estimation of the expectation of gain associated with internal and share price conditions, made
on the basis of a CAPM model of the share price using a Monte Carlo approach;
• Adjustment of the estimation by applying expected turnover rates.
Expenses were €152 thousand and €867 thousand for the financial year ended December 31, 2019 and
2020, respectively.
AGA Bonus 2019-1
AGA Bonus 2019 were granted to the Executive members Committee who opted for these compensation
plans. For each recipient, the number of shares definitely acquired is equal to the cash equivalent of 50%
of the annual variable compensation increased by a 30% premium. In the event of an over-performance
(i.e. achieved target above 100%), the surplus is paid in cash.
Expenses were €339 thousand for the financial year ended December 31, 2019. These instruments were
definitively acquired during the 2019 financial year. Consequently, no expense relating to these plans was
recognized during the financial year ended December 31, 2020.
Free performance shares 2020 (AGA Perf Employees 2020-1 / AGA Perf Management 2020)
Free performance shares granted in 2020 are subject to share price conditions and two vesting kickers
triggered by the performance of internal conditions, which are :
• A commercial break-even point for Lumoxiti in the US reached at the end of fiscal year 2023
(this criterion will not be met given the return of the commercial rights notified to AstraZeneca in
December 2020).
• Revenue from collaborative and licensing agreements accrued between the attribution and
definitive acquisition date (excluding payment by AstraZeneca for the first patient in Phase III for
monalizumab), reaching $100 million.
F-57
The fair value of these free performance shares is based on a third-party valuation report. The valuation
method used to estimate the fair value of these free performance shares is presented below:
•
Estimation of the expectation of gain associated with internal and share price conditions, made
on the basis of a CAPM model of the share price using a Monte Carlo approach;
• Adjustment of the estimation by applying expected turnover rates.
Expenses were €502 thousand for the financial year ended December 31, 2020.
AGA Bonus 2020-1
AGA Bonus 2019 were granted to the Executive members Committee who opted for these compensation
plans. For each recipient, the number of shares definitely acquired is equal to the cash equivalent of 50%
of the annual variable compensation increased by a 30% premium. In the event of an over-performance
(i.e. achieved target above 100%), the surplus is paid in cash.
Expenses were €394 thousand for the financial year ended December 31, 2020.
BSA 2013
BSA 2014
BSA 2015-1
BSA 2015-2
BSA 2017
July 17, 2013
July 16, 2014
April 27, 2015
July 1, 2015 September 20, 2017
BSA
Details of BSA
Date of grant (Board of
directors)
Vesting period (years)
2 years
2 years
2 years
Plan expiration date
July 17, 2023
July 16, 2024
April 26, 2025
Number of BSA granted
Share entitlement per BSA
Exercise price
Valuation method used
Grant date share fair value
Expected volatility
Average life of BSA
Risk-free interest rate
Expected dividends
Performance conditions
Fair value per BSA
237,500
1
€2.36
Black &
Scholes
€2.45
31.83%
5.5 years
2.42%
None
None
€0.87
150,000
1
€8.65
Black &
Scholes
€6.85
46.72%
5.5 years
1.00%
None
None
€2.51
70,000
1
€9.59
Black & Scholes
€13.65
54.08%
5.5 years
0.25%
None
None
€6.59
F-58
2 years
June 30,
2025
14,200
1
€14.05
Black &
Scholes
€13.64
47.83%
5.5 years
0.25%
None
None
€4.73
2 years
September 20, 2027
37,000
1
€11.00
Black & Scholes
€10.41
61.74%
6 years
0.20%
None
None
€0.57
Change in Number of BSA Outstanding
Number of BSA
Balance at beginning of period
Granted during the period
Forfeited during the period
Exercised during the period
Expired during the period
Balance at end of period
Breakdown of the Closing Balance
2018
Year ended December 31,
2019
2020
384,500
—
—
334,500
—
—
(50,000)
(25,000)
—
334,500
—
309,500
309,500
—
—
(25,000)
—
284,500
2018
Year ended December 31,
2019
2020
Outstanding
Exercisable
Outstanding
Exercisable
Outstanding
Exercisable
91,940
46,360
75,000
70,000
14,200
37,000
334,500
91,940
46,360
75,000
70,000
14,200
37,000
334,500
66,940
46,360
75,000
70,000
14,200
37,000
309,500
66,940
46,360
75,000
70,000
14,200
37,000
309,500
41,940
46,360
75,000
70,000
14,200
37,000
284,500
41,940
46,360
75,000
70,000
14,200
37,000
284,500
Number of BSA
BSA 2011-2
BSA 2013
BSA 2014
BSA 2015-1
BSA 2015-2
BSA 2017
TOTAL
BSAAR
BSAAR are securities whose subscription price and exercise price are fixed at their fair value as
determined by an expert. The BSAAR subscription therefore represents an investment on the part of the
beneficiary. At the end of the exercise period, if they have not been exercised, the BSAAR becomes void.
The Company benefits from a clause called «forcing» making it possible to encourage holders to exercise
their redeemable equity warrants when the market price exceeds the exercise price and reaches a threshold
defined in the BSAAR issuance agreement. The Company may, then, subject to a time period for
notifying holders that will permit them to exercise the BSAAR, decide to reimburse the warrants not
exercised at a unit price equal to the BSAAR acquisition price paid by its holder.
Details of BSAAR
BSAAR. The methodology used to estimate the fair value of the BSAAR is similar to the one used to
estimate the fair value of the BSA, except for the following:
Expected Term. Unlike the BSA, the Company does not have sufficient historical experience for the
BSAAR. Consequently, the expected term used for the valuation of the fair value is the legal maturity of
the instrument (10 years).
No share-based payment compensation expense was recognized relating to the BSAAR since the amount
paid by the beneficiaries is equal to the fair value.
Date of grant (Board of directors)
Vesting period (years)
Plan expiration date
Number of BSAAR granted
Share entitlement per BSAAR
BSAAR 2015
July 1, 2015
2 years
June 30, 2025
1,050,382
1
F-59
Exercise price
Valuation method used
Grant date share fair value
Expected volatility
Average life of BSAAR
Risk-free interest rate
Expected dividends
Performance conditions
Fair value per BSA
Change in Number of BSAAR Outstanding
Number of BSAAR
Balance at beginning of period
Granted during the period
Forfeited during the period
Exercised during the period
Expired during the period
Balance at end of period
Breakdown of the Closing Balance
€7.20
Black & Scholes
€13.77
41%
10 years
1.22%
None
No
€1.15
Year ended December 31,
2019
1,363,072
—
—
(750)
—
1,362,322
2018
1,363,072
—
—
—
—
1,363,072
2020
1,362,322
—
—
(1,500)
—
1,360,822
Number of
BSAAR
BSAAR 2011
BSAAR 2012
BSAAR 2015
TOTAL
2018
Outstanding
255,000
62,350
1,045,722
1,363,072
Year ended December 31,
2019
Exercisable
255,000
62,350
1,045,722
1,363,072
Outstanding
255,000
61,600
1,045,722
1,362,322
Exercisable
255,000
61,600
1,045,722
1,362,322
2020
Outstanding
255,000
60,100
1,045,722
1,360,822
Exercisable
255,000
60,100
1,045,722
1,360,822
Breakdown of expenses per financial year
The share-based compensation expenses are broken down as follows (in thousands of euro):
(in thousands of euro)
AGA Management 2016-1&2
AGA Employees 2017
AGAP Management 2017 / AGAP Employees 2017
AGA Bonus 2017 / AGA Bonus 2018
AGA Perf Management 2018 / AGA Perf Employees 2018
AGA 2018-1 Employees
AGA 2017-1 Management (New Members)
AGAP Employee 2019 / AGAP Management 2019
AGA Bonus 2019-1
AGA Bonus 2020
AGAP Employee 2020/AGAP Management 2020
Stock Options 2020
Share based compensation
F-60
Year ended December 31,
2019
2020
2018
1,392
456
567
208
84
—
—
—
—
—
—
—
2,707
1,351
152
252
190
782
579
29
152
339
—
—
—
3,826
—
—
—
—
618
23
43
867
—
394
502
28
2,475
12) Financial instruments recognized in the statement of financial position and related effect on the
income statement
The following tables show the carrying amounts and fair values of financial assets and financial liabilities.
The tables do not include fair value information for financial assets and financial liabilities not measured
at fair value if the carrying amount is a reasonable approximation of fair value.
As of December 31, 2018 (in thousands of
euro)
Book value on the
statement of
financial position
Fair value through
profit and loss(1)
Receivables
Fair value
Financial assets
Non-current financial assets
Trade receivables and others
Short-term investments
Cash and cash equivalents
Total financial assets
As of December 31, 2018 (in thousands of
euro)
Financial liabilities
Financial liabilities—non-current portion
Financial liabilities—current portion
Trade payables and others
Total financial liabilities
As of December 31, 2019 (in thousands of
euro)
Financial assets
Non-current financial assets
Trade receivables and others
Short-term investments
Cash and cash equivalents
Total financial assets
As of December 31, 2019 (in thousands of
euro)
Financial liabilities
Financial liabilities—non-current portion
Financial liabilities—current portion
Trade payables and others
Total financial liabilities
35,181
152,112
15,217
152,314
354,824
33,138
—
15,217
152,314
200,669
2,043
152,112
—
—
154,155
35,181
152,112
15,217
152,314
354,823
Book value on the
statement of
financial position
Fair value through
profit and loss(1)
Debt at
amortized
cost(3)
Fair value
3,175
1,347
91,655
96,177
—
—
—
—
3,175
3,175
1,347
1,347
91,655
96,177
91,655
96,177
Book value on the
statement of
financial position
Fair value through
profit and loss(1)
Receivables
Fair value
37,005
35,477
15,978
202,887
291,347
37,005
—
15,978
202,887
255,869
—
35,477
—
—
35,477
37,005
35,477
15,978
202,887
291,347
Book value on the
statement of
financial position
Fair value through
profit and loss(1)
Debt at
amortized
cost(3)
Fair value
—
—
—
—
16,593
2,130
49,504
68,225
16,593
2,130
49,504
68,225
16,593
2,130
49,504
68,227
F-61
As of December 31, 2020 (in thousands of
euro)
Financial assets
Non-current financial assets
Trade receivables and others
Short-term investments
Cash and cash equivalents
Total financial assets
As of December 31, 2020 (in thousands of
euro)
Financial liabilities
Financial liabilities—non-current portion
Financial liabilities—current portion
Trade payables and others
Total financial liabilities
Book value on the
statement of
financial position
Fair value through
profit and loss(1)
Receivables
Fair value
38,934
51,635
14,845
136,792
242,206
38,934
—
14,845
136,792
190,571
—
51,635
—
—
51,635
38,934
51,635
14,845
136,792
242,206
Book value on the
statement of
financial position
Fair value through
profit and loss(1)
Debt at
amortized
cost(3)
Fair value
16,945
2,142
29,539
48,626
—
—
—
—
16,945
2,142
29,539
48,626
16,945
2,142
29,539
48,626
(1) The fair value of financial assets classified as fair value through profit and loss corresponds to the market value of the assets, which are
primarily determined using level 2 measurements.
(2) The fair value of financial assets classified as fair value through comprehensive income corresponds to the market value of the assets,
which are primarily determined using level 1 measurements.
(3) The book amount of financial assets and liabilities measured at amortized cost was deemed to be a reasonable estimation of fair value.
In accordance with the amendments to IFRS 7, financial instruments are presented in three categories
based on a hierarchy of methods used to determine fair value:
Level 1: fair value determined based on quoted prices in active markets for assets or liabilities;
Level 2: fair value determined on the observable database for the asset or liability concerned either
directly or indirectly;
Level 3: fair value determined on the basis of evaluation techniques based in whole or in part on
unobservable data.
13) Revenue and government financing for research expenditures
Revenue from collaboration and licensing agreements
The Company’s revenue from collaboration and licensing agreements amounts to €79,892, €68,974 and
€56,155 for the fiscal year ended December 31, 2018, 2019 and 2020, respectively.
(in thousands of euro)
Proceeds from collaboration and licensing agreements
of which monalizumab agreement
of which IPH5201 agreement
of which Sanofi agreement
Invoicing of research and development costs (IPH5201 and
IPH5401 agreements)
Exchange gains (loss) on collaboration agreements
Others
Revenue from collaboration and licensing agreements
Year ended December 31,
2019
2020
2018
77,178
61,546
15,632
—
2,242
465
7
79,892
61,356
42,541
18,816
—
6,949
658
10
68,974
54,038
33,620
13,418
7,000
2,531
(602)
188
56,155
F-62
a)
Revenue recognition related to monalizumab AstraZeneca agreements and amendments
The Company identified the following promises under the monalizumab AstraZeneca agreements and
amendments: (1) a non-exclusive license related to monalizumab restricted to two applications, with an
option for an exclusive license related to monalizumab including all applications, (2) the performance of
certain initial studies related to phases I/II trials, and participation in certain studies of phases I/II trials
and phase III clinical trials through a co-financing.
The Company considered the license has a standalone functionality and is capable of being distinct.
However the Company determined that the license is not distinct from the performance of initial studies
and participation to phase III clinical trials because they increased the utility of the licensed IP. Thus, the
licensed IP, the performance of initial studies and participation to phase III clinical trials are combined
into a single performance obligation.
This performance obligation was considered as satisfied over time as AstraZeneca controls the licensed IP
which is being enhanced during the agreement. The revenue is recognized over time, based on the input
method (costs incurred). As a result, the Company recognizes the price of the transaction as a revenue on
the basis of the progress of studies that the Company has undertaken to carry out under the agreement.
Progression is assessed following to actual costs incurred relative to the total budgeted costs to fulfill the
obligation.
The transaction price was initially estimated to the initial payment of $250,000 thousand, less the amounts
that the Company expected to pay to AstraZeneca for co-financing Phase I/II clinical studies. The
additional payment of $100,000 thousand triggered by AstraZeneca’s exercise of the exclusivity option
was treated as a change in the price estimate of the transaction. In addition, the amendment of the
contract, which modified the scope and budget of the studies to be carried out by the Company as well as
the arrangements for sharing the cost of the other studies, led to a revision of the degree of progress and
the price of the transaction. Thus, the exercise of the option and the amendment of the contract resulted in
the recognition of a favourable cumulative adjustment of €38,321 thousand in revenue for the year ended
December 31, 2019.
The additional payment of $50,000 thousand triggered by the dosing of the first patient in the Phase 3 trial
evaluating monalizumab was treated in full as a collaboration commitment ("collaboration liability" in the
consolidated balance sheet) in view to the commitment linked to the contract for the Phase I / II (co-
financing) and Phase III studies (amendment signed in September 2020). Consequently, this additional
payment has no impact on the transaction price.
The subsequent milestones and potential royalty payments are excluded from the transaction price due to
the uncertainties of clinical trials results.
The Company used the most likely amount to determine variable consideration. Variable consideration
for cost-sharing payments related to certain studies of phases I/II trials and phase III clinical trials when
applicable are included in the transaction price.
As described in Note 2. d, the expected payments to AstraZeneca are classified as collaboration liability
in the consolidated statement of financial position. Quarterly invoices received from AstraZeneca reduce
the collaboration liability and have no impact on the consolidated statement of income.
F-63
Change in monalizumab deferred revenue (in thousands of euro):
As of December 31, 2017
Restatement related to the first application of IFRS 15
As of January 1, 2018 restated
Revenue for the 2018 financial year(1)
Increase in deferred revenue resulting from the exercise of the $100M option(2)
Transfer from collaboration liabilities
December 31, 2018
Revenue for the 2019 financial year
Transfer from collaboration liabilities
As of December 31, 2019
Revenue for the 2020 financial year
Transfer from collaboration liabilities
As of As of December 31, 2020
(1) The impact of the exercise of the option on 2018 revenue amounted to 31,966 thousand.
134,914
(53,083)
81,831
(61,546)
85,357
(717)
104,925
(42,541)
273
62,657
(33,620)
(2,465)
26,572
(2) The exercise of the $100,000 thousand option was converted to €87,002 thousand, of which €85,357 thousand was recognized as deferred
revenue and €1,644 thousand recognized in collaboration liabilities
Change in monalizumab collaboration liablities (in thousands of euro):
As of December 2017, as published
Restatement related to the first application of IFRS 15
As of January 1, 2018 restated
Additions
Deductions
As of December 31, 2018(1)
Additions
Deductions
As of December 31, 2019(2)
Additions(3)
Deductions
As of December 31, 2020(4)
—
44,751
44,751
—
(13,095)
31,656
—
(10,352)
21,304
46,320
(20,938)
46,686
(1) Of which €20,987 thousand of current portion and €10,669 of non-current portion.
(2) Of which €21,304 thousand of current portion.
(3) Including €41,227 thousand euros ($ 50,000 thousand) relating to the collaboration commitment following the milestone payment related
to the treatment of the first patient in the Phase 3 trial evaluating monalizumab.
(4) Of which €1,832 thousand of current portion and €44,854 of non-current portion.
b)
Revenue recognition related to IPH5201 AstraZeneca collaboration and option agreement
The Company determined that IPH5201 AstraZeneca collaboration and option agreement is an
enforceable contract under IFRS 15 as the upfront payment is non-refundable and thus AstraZeneca will
incur significant loss if it doesn’t exercise its licensed option. The Company considered that the exercise
price of the option granted to AstraZeneca for an exclusive license is a variable consideration.
F-64
The Company identified the following promises under the IPH5201 AstraZeneca collaboration and option
agreement: (1) an option for an exclusive license related to IPH5201 combined with the performance of
the services provided by the Company for preclinical studies and (2) the performance of research and
development services provided by the Company in conformity with the defined development plan for
clinical studies.
The Company has determined that the option and performance of research and development services
provided for preclinical studies is distinct from the performance of research and development services
rendered in accordance with the development plan defined for clinical studies to the extent that the
services rendered in the clinical phase could be performed (whether or not it owns) by AstraZeneca and
they do not significantly transform the intellectual property underlying the license. Thus, the option and
performance of research and development services in the preclinical phase are combined into a common
performance obligation, distinct from research and development services in the preclinical phase. This
performance obligation is fully resolved on December 31, 2020, the Company no longer intervening in
the preclinical development plan relating to IPH5201, following the launch of the first Phase 1 clinical
trial evaluating IPH5201 by AstraZeneca in March 2020, and the transfer to AstraZeneca in 2020 by the
Company of all critical proprietary expertise related to IPH5201. The contract liabilities relating to the
IPH5201 agreement are thus fully recognized as of December 31, 2020.
The transaction price was initially estimated to the initial upfront payment of $50,000 thousand (received
in October 2018 for $26,000 thousand and in January 2019 for $24,000 thousand) to which was added
during fiscal year 2020 a milestone payment of $5 million (received in June 2020) following the dosing of
the first patient in the first Phase I trial evaluating IPH5201. In addition, there is funding for research and
development work related to preclinical studies.
The option exercise price and subsequent milestone payments are excluded from the transaction price due
to their uncertainty related to the results of clinical studies. Likewise, the financing of research and
development work related to clinical studies is also excluded from the transaction price.
The performance obligation was considered as satisfied over time as the IP in development has no
alternate use for the Company as it is an exclusive license and that the Company has an enforceable right
to payment for completed research and development services.
The Company applied the input method and recognized the price of the transaction as a revenue
percentage of completion of the costs of the preclinical studies.
Change in IPH5201 deferred revenue (in thousands of euro):
The variance of the deferred revenue relating to this agreement is presented in the following schedule (in
thousands of euro):
As of December 31, 2017
Upfront payment
Revenue for the 2018 financial year
As of December 31, 2018
Revenue for the 2019 financial year
As of December 31, 2019
Increase in deffered revenue resulting from the $5m milestone relating to the dosage of the first
Phase I patient dosed
Revenue for the 2020 financial year
As of As of December 31, 2020
—
43,501
(15,632)
27,869
(18,816)
9,053
4,365
(13,418)
—
F-65
Revenue related to collaboration and option agreement related to four to-be-agreed upon
c)
molecules (preclinical molecules)
The Company determined that the option to acquire an exclusive license provides a material right to
AstraZeneca that it would not receive without entering into that contract. The Company will recognize
revenue when those future goods or services are transferred or when the option expires. Thus, the upfront
payment is recorded as a deferred revenue for an amount of €17,400 thousand as of December 31, 2020.
d)
Revenue recognition related to avdoralimab AstraZeneca agreement
The Company recognized revenue as research and development expenses are incurred (see Note 1.1.e for
agreement description).
e)
Schedule of variance of deferred revenue
The variance of the global deferred revenue is presented in the following schedule:
(in thousands
of euro)
Monalizumab
IPH5201
Preclinical
molecules
Total
December 31,
2017 as
published
134,914
—
—
Impact
IFRS 15
(53,083)
—
—
December
31, 2018 as
restated
81,831
—
Proceeds
85,358
43,501
Transfer
from
collaboratio
n liabilities
December
31, 2018
Recognition
in P&L
(61,548)
(15,632)
(715) 104,925
27,869
—
—
17,400
—
—
17,400
134,914 (1)
(53,083)
81,831
146,259
(77,180)
(715) 150,195
(1) Of which €47,909 thousand of current deferred revenue and €87,005 thousand of non-current deferred revenue.
(2) Of which €82,096 thousand of current deferred revenue and €68,098 thousand of non-current deferred revenue.
(in thousands of euro)
Monalizumab
IPH5201
Preclinical molecules
Total
December 31,
2018
Recognition in
P&L
Transfer from
collaboration
liabilities
December 31, 2019
104,925
27,869
17,400
150,195
(42,541)
(18,816)
—
(61,356)
273
—
—
273
62,657
9,054
17,400
89,112 (3)
(3) Of which €48,770 thousand of current deferred revenue and €40,342 thousand of non-current deferred revenue.
(in thousands of euro)
Monalizumab
IPH5201
Preclinical molecules
Total
December 31,
2019
Recognition in
P&L
Proceeds
Transfer from
collaboration
liabilities
62,657
9,054
17,400
89,112
(33,620)
(13,418)
—
—
4,365
—
(47,038)
4,365
(2,465)
December 31, 2020
26,572
—
(2,465)
—
—
17,400
43,973 (4)
(4) Of which €11,299 thousand of current deferred revenue and €32,674 thousand of non-current deferred revenue.
F-66
Government financing for research expenditures
The Company receives grants from the European Commission and the French government and state
organizations in several different forms:
•
Investment and operating grants; and
• Research Tax Credits.
The total amount for government financing for research expenditures recorded as other income in the
income statement can be analyzed as follows:
(in thousands of euro)
Research Tax Credit
Grant
Government financing for research expenditures
Year ended December 31,
2018
2019
2020
13,527
533
14,060
16,737
103
16,840
13,084
534
13,618
Sales (Lumoxiti)
As of December 31, 2020, following the end of the transition period relating to the commercialization of
Lumoxiti in the United States on September 30, 2020, the Company recognized net sales of Lumoxiti for
the fourth quarter for an amount of €678 thousand.
F-67
14) Operating expenses
(in thousands of
euro)
Subcontracting
costs(1)
Cost of supplies and
consumable
materials
Personnel expenses
other than share-
based compensation
Share-based
compensation
Personnel expenses
Non-scientific
advisory and
consulting(2)
Leasing and
maintenance
Travel expenses and
meeting attendance
Marketing,
communication and
public relations
Scientific advisory
and consulting(3)
Other purchases and
external expenses
Depreciation and
amortization
Intellectual property
expenses
Other income and
(expenses), net
Impairment of
intangible assets
Total net operating
expenses
2018
2019
2020
Year ended December 31,
R&D
SG&A
Total
R&D
SG&A
Total
R&D
SG&A
Impair
ment
Total
(42,327) —
(42,327) (41,193) —
(41,193) (24,355) (1,041) —
(25,396)
(3,819) —
(3,819) (3,208) —
(3,208) (3,638)
6
—
(3,632)
(13,520) (5,601) (19,121) (14,891) (7,747) (22,638) (14,394) (11,075) —
(25,469)
(706) (2,000) (2,707) (1,001) (2,825) (3,826)
(836) (1,639) —
(2,475)
(14,226) (7,601) (21,827) (15,892) (10,572) (26,464) (15,230) (12,714)
—
(27,944)
—
(5,301) (5,301)
(272) (8,384) (8,655)
(342) (9,075) —
(9,417)
(887) (1,081) (1,968)
(846) (1,026) (1,872)
(579) (1,702) —
(2,281)
(564)
(428)
(992)
(709) (1,044) (1,754)
(151)
(688) —
(839)
(119)
(399)
(518)
(95)
(534)
(629)
(96)
(420) —
(516)
(349) —
(349)
(223) —
(223)
(945) —
—
(945)
26
(337)
(311)
(57)
(757)
(814)
(46) (2,007) —
(2,053)
(6,709)
(693) (7,402) (15,518) (1,013) (16,530) (12,006) (1,277) —
(13,283)
(294) (1,087) (1,381)
(653)
(932) (1,585)
(882)
(851) —
(1,733)
(287) (1,215) (1,502)
(177) (1,542) (1,719)
(343) (1,477) —
(1,820)
—
—
—
—
—
—
—
—
(43,529) (43,529)
(69,555) (18,142) (87,697) (78,844) (25,803) (104,647) (58,613) (31,246) (43,529) (133,388)
(1) The Company subcontracts a significant part of its preclinical (pharmaceutical development, tolerance studies and other model
experiments, etc.) and clinical operations (coordination of trials, hospital costs, etc.) to third parties. Associated costs are recorded in
subcontracting on the basis of the level of completion of the clinical trials.
(2) Non-scientific advisory and consulting are services performed to support the selling, general and administration activities of the Company,
such as legal, accounting and audit fees as well as business development support.
(3) Scientific advisory and consulting expenses relate to consulting services performed by third parties to support the research and
development activities of the Company.
F-68
2018
Deloitte &
Associés
Total
Year ended December 31,
2019
Deloitte &
Associés
Total
2020
Deloitte &
Associés
Total
599
6
605
599
6
605
1,190
2
1,192
1,190
2
1,192
684
115
799
684
115
799
(in thousands of euro)
Audit fees
Non-audit fees
Total
* Non-audit fees: these fees correspond to services performed by the auditors related to the production of certification in the context of the
declaration of expenses for the obtention of grants; to the verification report of social and environmental information, special reports
within the framework of operations on the Company’s capital
Personnel expenses other than share-based compensation
The line item amounted to €19,121 thousand, €22,638 thousand and €25,469 thousand for the years ended
December 31, 2018, 2019 and 2020 respectively. The Company had 235 employees as of December 31,
2019, compared to 237 as of December 31, 2020.
Depreciation and amortization
The line item is mainly composed of the amortization of the monalizumab, IPH5201 and Lumoxiti
intangible assets (see Note 6).
Cost of supplies and consumable materials
Cost of supplies and consumable materials consists mainly of the cost of procurement of the Company’s
drug substance and/or drug product that is manufactured by third-parties. This line item amounts to
€3,819 thousand €3,208 thousand and €3,632 thousand for the years ended December 31, 2018, 2019 and
2020, respectively.
Intellectual property expenses
Intellectual property expenses amounted to €1,381 thousand, €1,585 thousand and €1,733 thousand for
the financial years ended December 31, 2018 , 2019 and 2020 respectively.
15) Net income / (loss) from distribution agreements
During the transition period (ended September 30, 2020), which is expected to terminate by the end of
2021, Lumoxiti products were commercialized in the United States by AstraZeneca who was the owner of
the regulatory approval. The Company concluded that it did not meet the criteria for being principal under
IFRS 15 during the transition period. Consequently, the net income (loss) resulting from all Lumoxiti
marketing operations during the transition period are disclosed in the item line “Net income / (loss) from
distribution agreements”
The Company recognized a €1,109 thousand net loss, a €8,219 thousand net loss and a €861 thousand
net income for the fiscal years ended December 31, 2018 , 2019 and the first three quarter of 2020
respectively, corresponding to production and marketing costs, net of sales proceeds, as invoiced by
AstraZeneca in relation to Lumoxiti distribution agreement for the period.
Following the end of the transition period relating to the commercialization of Lumoxiti in the United
States on September 30, 2020, the Company recognized net sales of Lumoxiti for the fourth quarter 2020
for an amount of €678 thousand (see note 13).
F-69
16) Net financial loss
Net financial loss can be analyzed as follows:
(in thousands of euro)
Interests and gains on financial assets
Unrealized gains on financials assets
Foreign exchange gains
Other financial income
Financial income
Foreign exchange losses
Unrealized losses on financial assets
Interest on financial liabilities
Other financial expenses
Financial expenses
Net financial income (loss)
Year ended December 31,
2019
2020
2018
1,582
—
4,068
352
6,002
(3,851)
(3,942)
(102)
(534)
(8,429)
(2,427)
1,620
4,063
5,568
18
11,269
(4,772)
—
(204)
(1)
(4,976)
6,293
564
313
3,978
—
4,855
(5,557)
(865)
(341)
—
(6,763)
(1,908)
For the financial years ended December 31, 2019 and 2020, the foreign exchange gains and losses mainly
result from the variance of the exchange rate between the Euro and the U.S. dollar on U.S. dollars
denominated cash and cash equivalent and financial assets accounts.
Unrealized losses on financial assets relate to unquoted instruments, the fair value of which is determined
using level 2 measurements.
17) Income Tax
Due to the Company’s early stage of development, it is not probable that future taxable profit will be
available against which the unused tax losses can be utilized. As a consequence, deferred tax assets are
recognized up to deferred tax liabilities.
Temporary differences mainly result from leases, provision for defined benefit obligation and tax losses
carryforwards.
As of December 31, 2020, the accumulated tax losses carryforwards of Innate Pharma SA were €287,739
thousand with no expiration date (€219,563 and €231,167 thousand as of December 31, 2018 and 2019).
As of December 31, 2020, the accumulated tax losses carryforwards of Innate Pharma Inc. was €11,955
thousand, or $14,670 thousand, (€493 thousand, or $564 thousand and €5,098 thousand, or $5,727
thousand as of December 31, 2018 and 2019, respectively), with a 20-year period expiration.
For the financial year 2018, the Company opted for the carry back mechanism which gave rise to a €333
thousand tax credit.
F-70
Tax rate reconciliation
(in thousands of euro)
Net income (loss) before tax
Statutory tax rate
Income tax benefit / (expense) calculated at statutory tax rate
Increase / (decrease) in income tax benefit / (expenses) arising
from:
Differences in tax rates
Research tax credit
Provision for defined benefit obligations
Share-based compensation
Revenue from collaboration agreements
Non-recognition of deferred tax assets related to tax losses and
temporary differences
Carry-back
Impact linked to intra-group merger operations
Impact linked to the exercise of a real estate leasing option
Others differences
Income tax benefit / (expense) (a)
Effective tax rate
Deffered tax income / (loss) (b)
Income tax benefit / (expense) (a) + (b)
18)
Commitments, contingencies and litigations
Commitments
Year ended December 31,
2018
3,049
33.33%
(1,016)
2019
(20,759)
31.00%
6,435
2020
(63,984)
28.00%
17,916
—
4,500
(359)
(902)
(1,830)
137
5,021
(20)
(1,186)
(5,251)
128
3,961
(117)
(693)
8,824
(214)
(5,136)
(15,746)
333
—
—
(179)
333
0.93%
—
333
—
—
—
—
—
0.00%
—
—
—
(16,288)
(1,103)
3,118
—
0%
—
—
The Company has identified the following changes in off-balance sheet commitments since December 31,
2019:
•
non-cancellable purchase commitments as of December 31, 2020 for a total of €2,896 thousand
with various CMO
Licensing and collaboration agreements
Commitments related the Company’s licensing and collaboration agreements are disclosed in Note 1.1.
Contingencies and litigations
The Company is exposed to contingent liabilities relating to legal actions before the labor court or
intellectual property issues happening in the ordinary course of its activities. Each pre-litigation, known
litigation or procedure in ordinary course the Company is involved in was analyzed at the closing date
after consultation of advisors.
In December 2020, the Company announced that it will return the US and EU commercialization rights of
Lumoxiti (moxetumomab pasudotox-tdfk) to AstraZeneca (MedImmune). Innate licensed the US and EU
rights to AstraZeneca’s FDA-approved Lumoxiti for certain patients with relapsed or refractory hairy cell
leukemia in October 2018. Discussions on the transition plan with AstraZeneca are still ongoing including
timing and costs, notably the split of certain manufacturing costs which are to date estimated at a
maximum of $12.8 million.
F-71
Provisions
Provisions amounted to €690 thousand, €256 thousand and €897 thousand as of December 31, 2018, 2019
and 2020, respectively. As of December 31, 2020, they mainly consist of a provision for charges
(€457 thousand euros) relating to a stock to be received at the start of 2021 concerning a batch of finished
Lumoxiti products and the employer contribution in respect of the grants of employee equity instruments.
In accordance with IFRS 2, when a Company decides to provide its employees with shares bought back
on the market, a provision has to be recognized upon the decision to allocate free shares that are spread
over the vesting period when the plan conditions actions for employees when they join the Company at
the end of the plan.
19) Related party transactions
Members of the Executive Board and Executive Committee
For each of the periods presented, the following compensation was granted to the members of the
Executive Committee of the Company and were recognized as expense:
(in thousands of euro)
Personnel expenses and other short-term employee benefits
Extra pension benefits
Share-based compensation
Executive Committee members compensation
Year ended December 31,
2019
2020
2018
2,340
12
1,856
4,208
2,811
12
2,450
5,273
3,131
—
1,363
4,494
As of December 31, 2020, three members of the Executive Committee were also members of the
Executive Board.
Joyson Karakunnel was appointed as member of the Executive Board in 2020.
Calculation of share-based compensation is detailed in Note 11.b.
Members of the Supervisory Board
The Company recognized a provision of €305 thousand for attendance fees (jetons de presence) relating
to the year ended December 31, 2020 which should be paid in 2021. This amount includes the
compensation for the Chairman of the Supervisory Board. The company recognized a provision of €216
thousand and €274 thousand as of December 31, 2018 and 2019, respectively.
Related parties
Novo Nordisk A/S is a board member and is related to the Company by three licensing agreements related
to the drug-candidates lirilumab, monalizumab and avdoralimab. Under the terms of the agreements,
Novo Nordisk A/S is eligible to receive milestone payments as well as royalties on future sales.
As of December 31, 2018, the Company had a €13,050 thousand additional consideration to be paid to
Novo Nordisk A/S relating to the additional consideration for monalizumab following the exercise of the
option by AstraZeneca and a €756 thousand liability relating to a production delivery of avdoralimab.
These amounts were paid in 2020.
As of December 31, 2019, the Company has a €588 thousand liability to be paid to Novo Nordisk A/S
relating to the withholding tax on monalizumab and avdoralimab acquisitions.
As of December 31, 2020, the Company had no liability to Novo Nordisk.
F-72
AstraZeneca is a shareholder and is related to the Company through several collaboration and option
licensing or license agreements for different drug candidates (monalizumab, avdoralimab, IPH5201 and
preclinical molecules) and a license agreement for the rights of the drug Lumoxiti. The payments between
the two companies as well as the liabilities and receivables as of 31 December 2020 are as follows:
(in thousands of euros)
Collection (AstraZeneca towards the Company) / Receivables
Payments (the Company towards AstraZeneca) / Liabilities
Total(1)
As of December 31, 2020
Payments
Assets/Liabilities
57,777
(40,254)
17,523
2,323
(4,871)
(2,548)
(1) In addition, the Company recognized in the income statement a net income of €861 thousand as net result from distribution agreements
(see Note 15) and an R&D expense of €3,549 thousand as operating expenses (see Note 14)
BPI France is a board member and has granted the Company a €1,500 thousand interest-free loan (Prêt à
Taux Zéro Innovation, or “PTZI”). This loan will be reimbursed starting September 2016 over a 5-year
period. On August 11, 2020, the Company signed a financing contract with Bpifrance Financement as
part of the program set up by the French government to help develop a therapeutic solution with a
preventive or curative aim against COVID-19. This funding, for a maximum amount of €6.8 million,
consists of (i) an advance repayable only in the event of technical and commercial success and (ii) a non-
repayable grant. This funding will be received in four successive installments. The first tranche of
€1,700 thousand was paid at signing, and the other three tranches will be received after successful
completion of certain clinical milestones, particularly around Phase 2 of the FORCE trial. The advance
repayable part will be reimbursed starting December 2023, only in envent of technical and commercial
success.
Subsidiaries
The business relationships between the Company and its subsidiary Innate Pharma Inc are governed by
intra-group agreements, conducted at standard conditions on an arm’s length basis.
20)
Income (loss) per share
Basic income (loss) per share
Basic income (loss) per share is calculated by dividing the net income (loss) attributable to equity holders
of the Company by the weighted average number of ordinary shares in circulation during the
corresponding period.
(in thousands of euro, except for data share)
Net income (loss)
Weighted average number of ordinary shares in circulation
Basic income (loss) per share (€ per share)
Year ended December 31.
2018
2019
2020
3,049
58,776,712
0.05
(20,759)
66,908,389
(0.31)
(63,984)
78,934,960
(0.81)
The instruments that entitle their holders to a portion of the share capital on a deferred basis (BSAs,
BSAAR, AGAs and AGAPs) are considered to be anti-dilutive (4,861,530 instruments in 2018, 4,810,448
instruments in 2019 and 1,564,662 instruments in 2020). These instruments are presented in detail in Note
11.
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Diluted income (loss) per share
Diluted income (loss) per share is calculated by dividing the net income (loss) attributable to equity
holders of the Company by the weighted average number of ordinary shares in circulation during the
corresponding period, increased by all dilutive potential ordinary shares.
(in thousands of euro, except for data share)
Net income (loss)
Weighted average number of ordinary shares in circulation
Adjustment for share instruments
Diluted income (loss) per share (€ per share)
Year ended December 31,
2018
2019
2020
3,049
58,776,712
570
0.05
(20,759)
66,908,389
—
(0.31)
(63,984)
78,934,960
—
(0.81)
21) Events after the reporting date
Laure-Helene Mercier, Executive Vice President, Chief Financial Officer and member of the Executive
Board, has decided to step down from her position, after leading the Company through more than 14
years of growth, including an initial public offering in the US. Frederic Lombard will join the company as
CFO on April 1, 2021. Mr. Lombard will be joining Innate with more than 20 years of financial
experience in the pharmaceutical industry, holding senior finance roles at Ipsen, AstraZeneca and
Novartis. Ms. Mercier will remain at the Company until the end of the year to ensure a smooth transition
of responsibilities.
On March 29 2021, the class action introduced on October 23, 2020 in United-States (California) was
volontarely dissmissed. This class action was introduced against Innate Pharma, Mondher Mahjoubi and
Laure-Hélène Mercier on the basis of an alleged violation of federal securities laws based on publications
relating to monalizumab trials between March 2020 and September 2020.
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