Phase III Trials Will Advance Lanifibranor For MASH Treatment

Key Takeaways

• Strategic focus on lanifibranor development, cutting other activities, and reducing workforce may improve net margins through operational efficiency.
  
• Key partnerships in Asia and financial strength ensure market penetration and support sustained investment, boosting future earnings potential.
  
• Heavy reliance on lanifibranor and halting other projects may hinder innovation and diversification, posing risks to revenue and future earnings.

Catalysts

A clinical-stage biopharmaceutical company, focuses on the development of oral small molecule therapies for the treatment of non-alcoholic steatohepatitis (NASH) and other diseases.

• The ongoing Phase III clinical trial for lanifibranor in MASH is anticipated to complete patient recruitment in the first half of 2025, with top-line results expected in the second half of 2026. This positions lanifibranor potentially as the second oral drug approved for MASH in the United States, which could significantly increase revenue.
  
• Inventiva has strategically prioritized resources towards lanifibranor’s development, including regulatory preparation and commercialization efforts, while cutting preclinical activities unrelated to lanifibranor and reducing workforce by approximately 50%. This focus could lead to improved net margins by optimizing operational efficiency.
  
• Partnerships in key Asian markets with licenses in Japan, South Korea, and China are expected to position lanifibranor as a leading treatment for MASH in these regions. Collaborations with partners like Hepalys and CTTQ could increase earnings from milestone payments and future market penetration.
  
• Strong financial backing from dilutive and nondilutive financing operations, including a structured deal worth up to €348 million, ensures a cash runway sufficient to reach September 2026 with the second tranche. This financial strength can support sustained investment in commercialization, potentially boosting future earnings.
  
• With no other oral liver-targeted drug candidates in Phase III for MASH, Inventiva’s unique position in a growing market with a high prevalence of conditions like type 2 diabetes enhances the drug’s potential impact on net revenue growth, given the unmet medical needs in this segment.

Inventiva Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Inventiva's revenue will decrease by 0.5% annually over the next 3 years.
• Analysts are not forecasting that Inventiva will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Inventiva's profit margin will increase from -1307.0% to the average GB Biotechs industry of 17.6% in 3 years.
• If Inventiva's profit margin were to converge on the industry average, you could expect earnings to reach €2.4 million (and earnings per share of €0.02) by about April 2028, up from €-184.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 371.1x on those 2028 earnings, up from -1.7x today. This future PE is greater than the current PE for the GB Biotechs industry at 10.5x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.04%, as per the Simply Wall St company report.

Inventiva Future Earnings Per Share Growth

Risks

• The decision to stop all preclinical activities not related to lanifibranor and reduce the workforce by approximately 50% could impact the company's ability to innovate and diversify, potentially affecting future revenues and margins.
  
• The net loss for the full year 2024 was €184.2 million, significantly up from €110.4 million in 2023, indicating higher operating costs or expenses, which could affect the company's profitability and net margins.
  
• Revenues decreased from €17.5 million in 2023 to €9.2 million in 2024, highlighting potential challenges in achieving consistent income streams, which could impact future earnings.
  
• Heavy reliance on the success of lanifibranor, especially as other projects are halted, poses a risk to revenue if the drug fails to perform as expected in clinical trials or the market.
  
• The need for additional financing beyond current measures suggests potential cash flow issues, which might lead to further dilution or debt, impacting net margins and earnings.

Valuation

• The analysts have a consensus price target of €6.3 for Inventiva based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €10.0, and the most bearish reporting a price target of just €3.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €13.9 million, earnings will come to €2.4 million, and it would be trading on a PE ratio of 371.1x, assuming you use a discount rate of 7.0%.
• Given the current share price of €3.22, the analyst price target of €6.3 is 48.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.