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first half of 2017: DELIVERING KEY CLINICAL Data and strengthening the Pipeline  

• Cash, cash equivalents and financial assets ^[1] for the Company amounted to €204.1m (million euros) as of June 30, 2017
• Significant clinical progress within the period:
  • Dose-escalation data of the ongoing Phase I trial evaluating IPH4102 showed a favorable safety profile and promising clinical activity
  • Expansion of a Phase I/II trial evaluating lirilumab, conducted by Bristol-Myers Squibb, including a randomized cohort exploring Opdivo with or without lirilumab in squamous cell carcinoma of the head and neck
• Clinical-stage pipeline further strengthened with the acquisition of IPH5401, a first-in-class anti-C5aR antibody, from Novo Nordisk A/S (closed in July 2017)
• Innate Pharma continues to advance its balanced portfolio of innovative partnered and proprietary immuno-oncology programs in line with its strategy to become a fully-integrated biopharmaceutical company

Innate Pharma SA (the "Company" - Euronext Paris: FR0010331421 - IPH) today reports its consolidated financial results for the first half of 2017. The summary of the condensed half-year consolidated financial statements is attached to this press release.

During the period, Innate Pharma has continued to make significant progress across its portfolio of first-in-class clinical antibodies designed to harness the innate immune system.

In June 2017, Innate Pharma presented results from the dose-escalation part of the Phase I trial evaluating IPH4102 at the ICML ^[2] . The data reported suggest that IPH4102 is well tolerated and shows promising signs of clinical activity in elderly and heavily pretreated patients with advanced cutaneous T-cell lymphomas (CTCL), which is an orphan disease, mostly with Sézary syndrome, a subtype with high unmet medical need. Innate Pharma is currently working on the next steps of the clinical development plan for IPH4102 and will present updated data of the ongoing Phase I trial at the EORTC CLTF ^[3] meeting in London in October.

In March, the protocol of the ongoing Phase I/II study evaluating lirilumab, led by Bristol-Myers Squibb, was amended and expanded to include additional cohorts of Opdivo (nivolumab) plus lirilumab in solid tumors, including a cohort exploring Opdivo with or without lirilumab in squamous cell carcinoma of the head and neck (SCCHN) and initial testing of the triplet combination of Opdivo, Yervoy (ipilimumab) and lirilumab in solid tumors.

Finally, in June, Innate Pharma entered into an agreement with Novo Nordisk A/S granting the Company full worldwide exclusive rights to develop and commercialize a first-in-class clinical-stage anti-C5aR antibody, now called IPH5401 . IPH5401 complements Innate Pharma's current clinical-stage immuno-oncology pipeline and reinforces the Company's position in the field of tumor microenvironment beyond the adenosine pathway. Innate plans to start clinical trials with IPH5401 in oncology in 2018.

Mondher Mahjoubi, Chief Executive Officer of Innate Pharma, commented : "We are continuing to leverage our deep scientific expertise in innate immunity to build a fully-integrated biopharmaceutical company with a growing portfolio of first-in-class programs. We have made great progress across key programs during the first half of 2017. The data presented for IPH4102 give us confidence to move this proprietary product into the next stage of clinical development. Moreover, I am proud that we could significantly strengthen our pipeline through the acquisition of IPH5401 from Novo Nordisk A/S and we look forward to advancing this first-in-class asset into the clinic in 2018."  

Financial highlights of the first half of 2017 :

The key elements of Innate Pharma's financial results for the first half of 2017 are as follows:

• Cash, cash equivalents and financial assets (current and non-current) amounting to €204.1m (million euros) as of June 30, 2017 (€230.7m as of December 31, 2016).
  • Financial liabilities amounted to €4.7m, including €3.5m of non-current liabilities (€5.3m as of December 31, 2016, including €4.1m of non-current liabilities).
• Revenue and other income amounting to €21.3m (€20.7m for the first half of 2016). This amount results from licensing revenue (€15.6m) and from research tax credit (€5.7m).
  • Revenue related to the licensing agreements mainly results from phasing of initial payment received by Innate Pharma in the context of the agreement signed in April 2015 with AstraZeneca/MedImmune.
• Operating expenses amounting to €39.5m (€23.6m for the first half of 2016), of which 80% are related to research and development.
  • The variance of the research and development costs (€31.6m compared to €20.3m for the first half of 2016) mainly results from higher subcontracting costs, which increased by €5.9m to €16.8m. This increase was mainly driven by the IPH4102 Phase I and other programs which are in IND-enabling studies.
• A net loss for the first half of 2017 amounting to €23.4m (€3.2m for the first half of 2016).

The table below summarizes the IFRS consolidated financial statements for the six-month period ended June 30, 2017, including 2016 comparative information.

Pipeline update:

Lirilumab (anti-KIR antibody), licensed to Bristol-Myers Squibb:

Lirilumab is a fully human monoclonal antibody that is designed to block the interaction between KIR2DL-1,-2,-3 inhibitory receptors and their ligands. Blocking these receptors facilitates activation of NK cells and potentially some subsets of T cells, ultimately leading to the destruction of tumor cells.

Lirilumab is being evaluated by Bristol-Myers Squibb in clinical trials in combination with other agents in a variety of tumor types.

• In January 2017, the Company announced that, as per the licensing agreement for lirilumab, Bristol-Myers Squibb paid Innate Pharma a US$15 million milestone payment for the continued exploration of lirilumab in combination with Opdivo. The milestone payment followed the presentation of encouraging preliminary activity results from a Phase I/II trial in a cohort of patients with SCCHN presented in November 2016 at the SITC ^[5] annual meeting.

• In February 2017, the Company announced top-line results from the EffiKIR trial ^[6] . The study did not meet its primary efficacy endpoint of leukemia-free survival ("LFS"). There was no statistically significant difference between either lirilumab arms and the placebo arm on the LFS nor on other efficacy endpoints. The adverse events encountered with lirilumab were consistent with its previously reported safety profile. Data analyses are ongoing and the full trial data will be submitted to a future medical conference and for publication. However, these findings do not call into question the program development potential, in particular the use of lirilumab in combination with other immune checkpoint inhibitors.
• In March 2017, Innate Pharma announced that Bristol-Myers Squibb had amended the clinical trial protocol for its ongoing Phase I/II trial evaluating the safety and tolerability of lirilumab in combination with Opdivo in patients with advanced refractory solid tumors. Under the amended protocol, updated on clinicaltrials.gov , the study has expanded in scope to include additional cohorts of Opdivo plus lirilumab in solid tumors, including a randomized cohort exploring Opdivo with or without lirilumab in platinum refractory recurrent or metastatic SCCHN, and initial testing of the triplet combination of Opdivo, Yervoy and lirilumab in solid tumors.

Monalizumab (anti-NKG2A antibody), partnered with AstraZeneca/Medimmune:

Monalizumab is a first-in-class immune checkpoint inhibitor targeting NKG2A receptors expressed on tumor infiltrating cytotoxic CD8 T lymphocytes and NK cells.

This monoclonal antibody is currently being tested in an exploratory program of Phase I or I/II clinical trials in various cancer indications in monotherapy and combinations.

• Clinical and preclinical data were presented in April 2017, at the American Association for Cancer Research (AACR) 2017 Annual Meeting in Washington D.C., USA:
  • Safety data from the dose-escalation part of a Phase Ib/II study evaluating monalizumab in combination with cetuximab in patients with recurrent or metastatic squamous cell carcinoma of the head and neck: in this study, monalizumab plus cetuximab were well tolerated with no additional safety concerns compared to monalizumab or cetuximab alone.
  • Preclinical data showed NKG2A expression on tumor-infiltrating CD8+ T cells in patients with head and neck cancer as well as synergy between treatment with a HPV vaccine and NKG2A blockade in a mouse tumor model.
• Innate Pharma presented preclinical data for monalizumab, at the 3rd CRI-CIMT-EATI-AACR International Cancer Immunotherapy conference, on September 6, 2017, in Frankfurt, Germany.
  • Poster #A130 demonstrates that blocking both NKG2A/HLA-E and PD-1/PD-L1 pathways enhance anti-tumor efficacy of CD8+ T cells. The data show that the deletion of either NKG2A (Qa-1b) or PD-L1 significantly delays tumor growth, suggesting that both receptors are involved in the immune-escape of tumors. Combined PD-L1 and NKG2A blockade achieved a complete response of 82%, compared to 54% for anti-PD-L1 and 36% for anti-NKG2A alone. CD8+ tumor infiltrated lymphocytes (TILs) expressing high levels of PD-1 co-expressed high levels of NKG2A, raising the possibility that NKG2A blockade may potentiate PD-1/PD-L1 blockers by directly enhancing CD8+ T cell-mediated killing of tumors.

IPH4102 (anti-KIR3DL2 antibody):

IPH4102 is a first-in-class cytotoxicity-inducing antibody currently being tested in a Phase I clinical trial for the treatment of cutaneous T-cell lymphomas ("CTCL"), in particular their aggressive forms, Sézary syndrome and transformed mycosis fungoides.

• In May 2017, Innate Pharma announced the completion of the dose-escalation part of the Phase I trial evaluating IPH4102. Full dose-escalation safety results, as well as updated clinical activity data were presented in June 2017, at the ICML in Lugano :
  • 25 patients, with a median age of 71 years old and a median number of four prior systemic treatments, were evaluable for safety (10 dose levels: 0.0001 to 10 mg/kg). The data from the trial indicate that IPH4102 was well tolerated with no dose-limiting toxicity. The maximum tolerated dose (MTD) was not reached. The majority of adverse events reported was typical for CTCL or reflected low grade infusion-related reactions.
  • As of May 10, 2017, 24 patients were evaluable for clinical activity. In this population, best global overall response rate (ORR) was 41.7% and disease control rate (DCR) was 91.7% across all dose levels. Best global ORR and DCR reached 47.4% and 89.5% respectively in patients with Sézary syndrome (SS, n=19). Among the 9 patients with SS who achieved clinical responses, one had a global complete response ^[7] . 5 complete responses were seen in blood and 2 in skin (resp. 26% and 11%). Median duration of response (DOR) was 8.2 months in all patients and not reached in patients with SS. Median progression free survival (PFS) was 9.0 months in all patients and 10.8 months in patients with SS (range from 0.9 to 17.2). Pruritus was significantly decreased in patients with clinical response.
  • Innate Pharma will present updated data from the ongoing Phase I trial at the EORTC CTLF meeting in London in October 2017.
• In June 2017, IPH4102 was granted orphan drug designation in the United States for the treatment of CTCL, a designation it already had in the European Union.

IPH5401 (anti-C5aR antibody):

IPH5401 is a first-in-class therapeutic antibody that specifically binds and blocks C5a receptors (C5aR) expressed on subsets of myeloid-derived suppressor cells (MDSC) and neutrophils. Part of the innate immune system, these types of cells promote tumor growth by secreting inflammatory and angiogenic factors, and they potently suppress anti-tumor T and NK cells, and hamper the activities of PD-1 checkpoint blockers. C5a, a factor in the complement cascade, is often overexpressed in tumors, where it attracts and activates MDSC and neutrophils in the tumor microenvironment.

• On June 2, 2017, the Company announced that it entered into an agreement with Novo Nordisk A/S granting Innate Pharma full worldwide exclusive rights to develop and commercialize a first-in-class clinical-stage anti-C5aR antibody (IPH5401). The terms of the transaction provide for a total upfront payment of €40.0m, of which €37.2m has been paid in new Innate Pharma shares (3,343,749) and €2.8m in cash. Novo Nordisk A/S will be eligible for €370.0m in development, regulatory and sales milestone payments. Novo Nordisk A/S will also be eligible for double digit royalties on net sales. Under the terms of the transaction, Innate Pharma acquired worldwide rights to anti-C5aR/IPH5401 in all indications from Novo Nordisk A/S. Innate Pharma issued a press release on July 13, following the acquisition of the Novo Nordisk A/S subsidiary owning the rights of anti-NKG2A. With the allocation of the newly issued shares in the Company, Novo Nordisk A/S's stake in the share capital of Innate Pharma increased from 10.3% to 15.5%.
  • Novo Nordisk A/S has conducted two Phase I trials with anti-C5aR in patients with rheumatoid arthritis, where a good safety profile was demonstrated. Innate Pharma plans to start clinical trials with IPH5401 in oncology in 2018.
• Innate Pharma presented preclinical data for IPH5401 at the 3rd CRI-CIMT-EATI-AACR International Cancer Immunotherapy conference, on September 8, 2017, in Frankfurt, Germany.
  • In poster#B184, the data demonstrate that IPH5401 selectively inhibits the activation of neutrophils. Moreover, the data show that the combined administration of anti-C5aR with anti-PD-1 reduced tumor growth. These data suggest that C5aR blockade may result in a more permissive environment for immune-mediated tumor killing and treatment with checkpoint inhibitors.

Corporate update:

Management and governance changes:

• In June 2017, the Company announced the resignation of Nicolai Wagtmann, PhD, Executive Vice-President and Chief Scientific Officer of Innate Pharma, and member of the Executive Board, due to personal reasons to pursue a career in the US.
• Yannis Morel, PhD, Executive Vice President, Chief Business Officer and member of the Executive Board, has been appointed Executive Vice-President Products Portfolio Strategy & Business development. In this role, Yannis now oversees the strategy of Innate's growing portfolio of clinical and preclinical assets. Yannis assumes the role of interim CSO.
• During the period, Bpifrance Participations, represented by Maïlys Ferrère, was appointed to the Supervisory Board. Prof. Jean-Charles Soria, who has been named Senior Vice President, Head of Oncology Innovative Medicines at MedImmune, resigned from his mandate.

Team:

As at June 30 2017, the headcount was 171 employees.

About Innate Pharma:

Innate Pharma S.A. is a clinical-stage biotechnology company dedicated to improving cancer treatment and clinical outcomes for patients through first-in-class therapeutic antibodies that harness the innate immunity.

Innate Pharma specializes in immuno-oncology, a new therapeutic field that is changing cancer treatment by mobilizing the power of the body's immune system to recognize and kill cancer cells.

The Company's broad pipeline includes four first-in-class clinical stage antibodies as well as preclinical candidates and technologies that have the potential to address a broad range of cancer indications with high unmet medical needs.

Innate Pharma has pioneered the discovery and development of checkpoint inhibitors, with  a unique expertise and understanding of Natural Killer cell biology. This innovative approach has resulted in major alliances with leaders in the biopharmaceutical industry including AstraZeneca, Bristol-Myers Squibb, Novo Nordisk A/S and Sanofi. Innate Pharma is building the foundations to become a fully-integrated biopharmaceutical company.

Based in Marseille, France, Innate Pharma has more than 170 employees and is listed on Euronext Paris.

Learn more about Innate Pharma at www.innate-pharma.com

Information about Innate Pharma shares:

Disclaimer:

This press release contains certain forward-looking statements. Although the company believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those anticipated. For a discussion of risks and uncertainties which could cause the company's actual results, financial condition, performance or achievements to differ from those contained in the forward-looking statements, please refer to the Risk Factors ("Facteurs de Risque") section of the Document de Reference prospectus filed with the AMF, which is available on the AMF website ( http://www.amf-france.org ) or on Innate Pharma's website.

This press release and the information contained herein do not constitute an offer to sell or a solicitation of an offer to buy or subscribe to shares in Innate Pharma in any country.

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Interim Consolidated Financial Statements and Notes

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