BioWorld International Correspondent

PARIS - Innate Pharma SAS is planning an IPO on the Eurolist Compartment C of the Paris Euronext stock exchange, hoping to raise between €25 million (US$31.9 million) and €35.6 million.

The Marseille, France-based company is offering an initial 4.8 million new shares, which could be increased by 15 percent, or 723,000 shares, to 5.5 million shares, to private investors in France and institutional investors in both France (through a public placement) and certain other countries excluding the U.S. (through a private placement).

Taking account a 15 percent 830,000-share overallotment option for underwriters, the offering could total 6.4 million shares, which compares with the 17.2 million shares currently issued.

In addition, the company's largest single shareholder, Copenhagen-based Novo Nordisk A/S, is to make an investment of €5 million to increase its equity stake to 20 percent (from 18.4 percent). Innate Pharma has been collaborating with the Danish company since 2003 on the development of new drugs targeting natural killer (NK) cells for cancer, autoimmune disorders and infectious diseases.

The indicative price range for the offering is €4.15 to €4.80 per share, valuing the company at €72 million to €82.5 million before the IPO and at €97 million to €118 million afterward. The lead managers and bookrunners for the operation are Bryan, Garnier & Co. Ltd., of London, and SG Corporate & Investment Banking, a subsidiary of Paris-based Société Générale.

Innate Pharma is not in urgent need of funds since, as CEO Hervé Brailly pointed out, it has cash in hand of more than €30 million. He explained that the aim was to give the company a stronger capital structure in anticipation of increased investments in clinical trials in the coming years and to put it in a good position to negotiate future partnering deals.

Brailly also stressed that the IPO was not aimed at giving existing investors an exit, since none of them are selling shares and some are planning to increase their holdings. Eleven mostly European venture capital firms own 64.7 percent of the company's capital.

Innate Pharma is developing new classes of drug candidates acting on the innate immune system and is focusing primarily on cancer, although it recently selected a new compound for development in the treatment of chronic viral infections. Other potential fields include allergy, chronic inflammation and chronic obstructive pulmonary disease. In the case of cancer, its products are designed not only to kill tumor cells but also to break the immune system's tolerance of tumors.

Innate is developing a family of immuno-modulating agents targeting four different cells - gd cells, NK cells, NK.T cells and TLR3 receptors. Its lead compound, IPH 1101, is a gd agonist that is in Phase II trials for metastatic renal carcinoma (mRCC) and Phase I trials in leukemia and lymphoma. Four more Phase II trials of IPH 1101 are due to get under way in 2007 in non-Hodgkin's lymphoma, viral hepatitis C, monocytic leukemia and solid tumors, while the first results of the Phase II trial in mRCC should be available in the fourth quarter of next year.

A second gd agonist, IPH 1201, is about to enter preclinical development in viral hepatitis C, and Innate expects to decide in the first half of 2008 on clinical trials.

Regarding the NK agonist and antagonist program Innate is undertaking jointly with Novo Nordisk, the companies signed a second three-year collaboration in April providing for each to contribute relevant intellectual property rights, expertise and R&D personnel to the collaboration on an exclusive basis. Novo will be the exclusive licensee of all drug candidates developed under the agreement, although Innate Pharma will retain some rights to specific niche indications under certain conditions.

As well as receiving R&D funding and preclinical milestones from Novo, Innate will be eligible for developmental and regulatory milestones (up to about €25 million per drug candidate, from the first IND to first commercial sales), as well as royalties on future product sales that will be in the "high single-digit" range, Brailly said.

The NK program consists of one product in clinical development, IPH 1201, which has just entered a Phase I trial for blood cancers, and two products at the validation stage - IPH 22XX (cancer) and IPH 23XX (chronic inflammation and autoimmunity).

As for Innate's TLR platform, that was created in 2005 and was consolidated in 2006 through the acquisition of IP assets from Schering-Plough Corp., of Kenilworth, N.J., and the French cancer center Institut Gustave-Roussy. The deal with Schering-Plough also included the acquisition of part of its research center in Lyon, together with a dozen staff.

The first product to emerge from the platform was a TLR3 receptor agonist, IPH 31XX, which Innate intends to develop in several indications as a targeted immunotherapy addressing TLR3-positive cancers, especially TLR3-positive breast cancers. The company expects the drug to enter preclinical development in the first half of 2007, with a view to initiating a Phase I trial in 2008.

Innate's strategy is to partner out the products emanating from those programs at the Phase III stage, starting with the gd platform in 2008-09. It also is considering an earlier-stage partnership for its TLR3 platform in 2007-08.

Innate Pharma, which was founded in 1999, currently employs 66 people at its two sites in Marseille and Lyon. It recorded a net loss of €3.7 million in the first half of 2006, up from €2.5 million in the corresponding six months of 2005. Over the 2003-2005 period, the company invested €20 million in research and development and recorded a cumulative net loss of €15.8 million. Following the IPO, it hopes to have boosted its cash reserves to €55 million to €60 million, in addition to which it expects to receive revenues and milestones of €15 million from Novo Nordisk in 2007-08.

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