GENFIT: First Half-Year 2020 Financial Report and New Corporate Strategy
- Cash position of €226 million at June 30, 2020 (€277 million at December 31, 2019)
- New Corporate strategy focused on two priority areas:
- Development of elafibranor in Primary Biliary Cholangitis (PBC): ongoing enrolment for Phase 3 clinical trial ELATIVE™
- Commercialization of NIS4™ for NASH diagnosis: exclusive licensing agreement with Labcorp
- Plan to create two GENFIT SA subsidiaries by 2021, to facilitate decision-making and enable an independent management and growth
- Corporate restructuring plan to reprioritize capital for essential operating activities. Objective of cash burn reduction by more than 50% by 2022:
- Termination of elafibranor’s clinical development in NASH
- Termination of all activities associated with elafibranor’s launch preparations in NASH
- Reallocation of our research program to focus efforts on key programs
- Comprehensive cost-saving plan and restructuring plan, with a 40% workforce reduction in the Group
Lille, France; Cambridge, MA; September 30, 2020 - GENFIT (Nasdaq and Euronext: GNFT), a late-stage biopharmaceutical company dedicated to improving the lives of patients with metabolic and liver diseases, today announced its first half-year 2020 financial report, including the advances of its R&D portfolio and the new GENFIT corporate strategy. The Half Year Business and Financial Report, including the new corporate strategy is available to the public and was filed with the French Autorité des marchés financiers (French Financial Markets Authority) today. The condensed consolidated financial statements are included in this press release and the complete financial statements are available on the “Investors” page of the GENFIT website.
Conference Call in English on September 30, 2020 at 4:30pm EDT / 22:30 CEST, and in French on October 1, 2020 at 1:30am EDT / 7:30am CEST
Both the English and French conference calls will be accessible on the investor page of our website, under the events section at https://ir.genfit.com/ or by calling 877-407-9167 (toll-free U.S. and Canada), 201-493-6754 (international) or 0 800 912 848 (France) five minutes prior to the start time (no passcode needed). A replay will be available shortly after the call.
New corporate strategy and prospects
The company’s corporate strategy now focuses on two priority areas:
- Phase 3 clinical trial ELATIVE™ evaluating elafibranor in PBC:
- Patient enrolment now started, and results expected early 2023, given the current constraints due to the COVID-19 pandemic;
- Following the positive Phase 2 data of elafibranor in PBC, the U.S. Food and Drug Administration (FDA) granted elafibranor Breakthrough Therapy designation. The ELATIVE™ study aims to confirm elafibranor’s previously successful results of efficacy, potential improvement in pruritus and safety in PBC patients;
- Current market size for second line therapies in PBC is estimated at ~ $300MM in 2020 and is anticipated to experience double digit growth and estimates for 2025 are up to $1B. Elafibranor is a promising alternative therapy to the existing treatment in PBC, based on the significant unmet needs in this indication.
- NIS4TM technology for (NASH) diagnosis:
- NIS4TM technology data, recently published in The Lancet Gastroenterology & Hepatology, confirmed the technology’s diagnostic performance and garnered the support of leading NASH experts;
- The recently announced exclusive licensing agreement with Labcorp for NIS4 TM technology will enable a large-scale commercial launch as of next year;
- NIS4TM addresses patients’ and payers’ requirements as liver biopsy remains the only – although imperfect – approved diagnostic option in the clinical development field and cannot be replicated on a large scale due to its painful and invasive nature, and its cost for healthcare systems. It would be impossible to diagnose all patients with biopsies given the limited number of procedures that can be performed. The blood test commercialized by Lacorp will address these multiple challenges;
- The NASH therapeutic market is potentially significant, however, the opportunity is dependent on quick, reliable and easy to execute diagnostic solutions to identify patients. NIS4TM technology represents the essential first step in managing patients with NASH and is the first step for patients to take control, even in the absence of treatments, of their disease.
GENFIT’s new strategy includes a plan, which aims to create two distinct operational subsidiaries by 2021 to enable more independent management and growth:
- The first entity would be dedicated to the development of specialty indications, starting with the Phase 3 trial in PBC;
- The second entity would house NASH solutions, including all programs related to the identification, evaluation and monitoring of patients with NASH. This independent structure would facilitate future partnerships for NIS4™.
The two entities would remain a part of GENFIT as a listed company, who would ensure adequate decision making between both “business” entities, the goal being to best highlight each of the activities to benefit the Group’s valuation.
Concurrently, GENFIT is adopting a plan to reallocate and rationalize all capital with an objective to reduce the cash burn by more than 50% by 2022 compared to our cash burn prior to the RESOLVE-IT Phase 3 data. The program aims to reduce the current cash burn rate from €110M annually before our Phase 3 data, to approximately €45MM annually, beginning in 2022. Due to the residual expenses related to the termination of RESOLVE-IT, 2021 will be a transition year.
This plan incorporates the following key components:
- The overall clinical development program for elafibranor in NASH and all activities associated with the commercial launch of elafibranor in NASH have been terminated given the low probability of success compared to required expenses. The termination includes the NASH combination therapy trials, the pediatric trials, and other trials such as the evaluation of the impact of elafibranor on liver fat composition;
- A comprehensive cost-saving plan has been implemented, including the redirection of R&D activities and the termination of secondary programs (i.e. the RORgT program);
- A workforce restructuring plan aims to reduce the overall workforce by 40%, encompassing both the U.S and France in order to align the company size to the new scope of activity.
Lastly, GENFIT plans to propose to the holders of its OCEANE bond (€180 million nominal amount with a maturity of October 16, 2022) and its shareholders, an adjustment of the terms of the OCEANE convertible bond. The Company's objective is to begin this process towards the end of the year, in order to have a balance sheet which is structured in line with its new strategy.
Pascal Prigent, CEO of GENFIT, stated: “The decisions we have taken allow us to move GENFIT forward towards 2021 with a clear and precise roadmap. We are confident in the probability of success, and the potential of our two priority programs. The evolution of the company also ensures the structure adapts to our strategy, with an approach that is both organizationally and financially sound.”
Key aspects of the half-year 2020 results
Key aspects of the half-year 2020 results are:
- Cash and cash equivalents of €225.7 million at June 30, 2020 (€276.7 million at December 31, 2019);
- Operating income of €5.9 million (€5.4 million at June 30, 2019), essentially from the Research Tax Credit, which amounted to €5.2 million for the first half 2020 (€5.3 million in the preceding half year);
- Operating expenses of €55.0 million (€51.3 million at June 30, 2019) of which 67% represented R&D expenses.
The increase in operating expenses is due to increases in marketing and pre-commercialization expenses, which amounted to €9.5 million in the first half 2020 (€2.9 million in the first half 2019). Marketing and pre-commercialization expenses will significantly decrease as of the second half 2020 due to the discontinuation of the pre-commercialization work for elafibranor in NASH following the termination of this program in July 2020.
General and administrative expenses (€8,2 million in the first half 2020 compared to €9.5 million in the first half 2019) and research and development expenses (€36.9 million in the first half 2020 compared to €38.9 million in the first half 2019) have decreased slightly between 2019 and 2020. These expenses will progressively decrease as of the second half 2020 following the Company’s decision to begin the process of terminating the clinical trials for elafibranor in NASH, terminating secondary programs and to execute a comprehensive cost saving plan over 3 years. Significant expenses related to the termination of the RESOLVE-IT trial will be due in the second half 2020 and in 2021.
As a result of changes in revenues and expenses, the net loss amounted to €53.0 million at June 30, 2020 (€51.1 million at June 30, 2019). The net loss for 2019 was €65.1 million.
The table below presents the condensed Consolidated Statement of Operations under IFRS for the first half 2020, with comparative figures for the first half 2019.
For the six-month period ended | |||
(in € thousands, except earnings per share data) | June 30, 2019 | June 30, 2020 | |
Revenues and other income | |||
Revenue | 1 | 122 | |
Other income | 5 356 | 5 745 | |
Revenues and other income | 5 357 | 5 867 | |
Operating expenses and other operating income (expenses) | |||
Research and development expenses | (38 908) | (36 867) | |
General and administrative expenses | (9 517) | (8 251) | |
Marketing and market access expenses | (2 876) | (9 491) | |
Other operating income (expenses) | 7 | (423) | |
Operating income (loss) | (45 936) | (49 163) | |
Financial income | 1 755 | 2 095 | |
Financial expenses | (7 240) | (6 102) | |
Financial profit (loss) | (5 485) | (4 007) | |
Net profit (loss) before tax | (51 422) | (53 170) | |
Income tax benefit (expense) | 289 | 159 | |
Net profit (loss) | (51 132) | (53 011) | |
Attributable to owners of the Company | (51 132) | (53 011) | |
Attributable to non-controlling interests | — | — | |
Basic and diluted earnings (loss) per share | |||
Basic and diluted earnings (loss) per share (€/share) | (1,64) | (1,36) |
Further information is described in the above New Corporate Strategy and Prospects section of this press release and in the condensed consolidated financial statements at June 30, 2020 under IFRS as well as the management discussion of the results are provided in the appendix at the end of this document. The condensed consolidated financial statements as well as the statutory auditors' report on those financial statements are appended to the 2020 Half Year Business and Financial Report and available on the “Investors” page of the GENFIT website.
We encourage investors to take into consideration all the information presented in our 2019 Annual Report on Form 20-F (“Form 20-F”) and in this Half-Year Business and Financial Report before deciding to invest in Company shares; these two documents are available on GENFIT’s website www.genfit.com and on the website of the AMF (www.amf-france.org). This includes, in particular, the risk factors described in Item 4 of the Form 20-F (and the contents of this section), of which the realization may have (or has had in some cases) material adverse effect on the Group and its activity, financial situation, results, development or perspectives, and which are of importance in the investment decision-making process.
Key events of the first half of 2020 and main events after the reporting period
R&D Programs of the Company during H1 and After the Reporting Period
Elafibranor Development Program in NASH
RESOLVE-IT Phase 3 Study in NASH
In February, the Company announced that the final visit of the last patient for the interim cohort to support accelerated marketing approval had been completed on time, and the clinical trial database would be locked before the end of February. It also announced in late March 2020 that, despite the COVID-19 pandemic, it had decided to continue the extension phase of the RESOLVE-IT trial thanks to the implementation of measures allowing to ensure the safety of patients who were already enrolled in the study.
In May, the Company announced the topline results of the interim analysis of the RESOLVE-IT Phase 3 trial evaluating the efficacy of the daily administration of elafibranor 120 mg in adults with NASH.
The RESOLVE-IT Phase 3 trial evaluated the effect of elafibranor compared to placebo in 1,070 patients (ITT population) with biopsy proven NASH as defined by NAFLD activity score (NAS) greater than or equal to 4, fibrosis stage 2 or 3. Patients were randomized 2:1 to receive elafibranor 120mg or placebo once daily, with a follow-up liver biopsy at week 72 to evaluate histologic endpoints (resolution of NASH without worsening of fibrosis or fibrosis improvement of at least one stage).
Resolution of NASH is defined by a ballooning score of 0 and an inflammation score of 0 or 1, and the non-worsening of fibrosis corresponds to a fibrosis score that does not increase.
The trial did not meet the predefined primary endpoint of NASH resolution without worsening of fibrosis in the ITT population. In the ITT population, 19.2% of patients who received elafibranor (N=138) achieved NASH resolution without worsening of fibrosis compared to 14.7% of patients in the placebo arm (N=52) (p=0.07).
On the key secondary endpoint of fibrosis improvement of at least one stage, 24.5% of patients who received elafibranor (N=176) achieved fibrosis improvement of at least one stage compared to 22.4% (N=79) in the placebo arm (p=0.445).
Statistical significance was not achieved in the other key secondary endpoint related to metabolic parameters, which were: triglycerides, non-HDL cholesterol, HDL cholesterol, LDL cholesterol, HOMA-IR in non-diabetic patients, and HbA1c in diabetic patients.
The favorable safety and tolerability profile of elafibranor observed in our previously conducted trials was similar to what has been observed in the interim results of RESOLVE-IT, which is encouraging for the ongoing Phase 3 trial evaluating elafibranor in PBC (see below).
While the topline results do not support an application for accelerated approval of elafibranor by the FDA under Subpart H or conditional approval by the European Medicines Agency (“EMA”), the Company announced, also in May, its intention to review in detail the full dataset and conduct additional analyses in order to understand why the placebo response rate was higher than what was expected before making a decision regarding the future of the RESOLVE-IT trial.
On July 22, 2020, following the detailed review of the full RESOLVE-IT interim efficacy dataset, the Company determined that the investment needed to continue the trial was not justified, as it was unlikely to provide results that would be sufficient to support elafibranor for registration in NASH in the United States and Europe. The Company announced that it would engage with the RESOLVE-IT investigators to expedite the trial termination process –which is ongoing at the time of this report and due to last for several months– and that it would also meet with regulatory agencies to share key learnings, including results from the second reading of liver biopsies that will help better understand inter-reader variability and its impact. The Company also indicted that it is now focusing its efforts on developing its two major programs: elafibranor development in PBC, and the commercial growth of NIS4™ technology, for NASH diagnostics.
Pediatric NASH, Phase 2 Trial Addressing Liver Fat and Therapeutic Combination Program with elafibranor in NASH
Due to the COVID-19 pandemic, the Company had announced in late March that:
- enrollment of patients in the PK/PD trial in pediatric patients with NASH as well as the Phase 2 study addressing liver fat had been paused;
- the initiation of the Phase 2 combination study in NASH with elafibranor had been put on hold.
In September and following its decision to terminate all development of elafibranor in NASH, the Company decided to initiate the termination process of the PK/PD trial in pediatric NASH as well as the Phase 2 study on hepatic lipid composition.
Considering that clinical trials in the NASH space involve a large number of patients, are long and very expensive, as well as the fact that the regulatory and competitive landscape in this therapeutic area is in constant evolution, the Company has considered that the cost in relation to the probability of success was too high to continue development of elafibranor in NASH.
Other Phase 1 trials
The Company also announced in March, in the context of the COVID-19 pandemic, that all ongoing or upcoming phase 1 trials – which included pharmacokinetic, food effect and bioequivalence studies – had been put on hold. These studies were necessary to support a potential elafibranor NDA submission.
Since then, in line with the decision to end development of elafibranor in NASH, the following decisions have been made regarding these trials, given that some of them will be required for a new drug application for elafibranor in PBC:
- Pharmacokinetic and drug interaction studies have resumed;
- The bioequivalence study has restarted;
- The food interaction study will start in 2021.
Phase 3 of elafibranor Development in PBC Program
Due to the COVID-19 pandemic, the Company announced in late March that the start of the Phase 3 study in patients with PBC had been delayed.
In September, the Company has announced the completion of the first patient first visit in the ELATIVE™ Phase 3 trial. Appropriate measures will be implemented, including virtual appointments, biological evaluations performed by local laboratories, delivery of the drug candidate to the patients’ home, to ensure the safety of participants in the study.
NIS4™ Diagnostic Program in NASH
During the first half of the year, the NIS4™ technology to support a diagnostic solution continued to be deployed in the clinical research field through Covance. While interest in NIS4™ technology is high, the Company announced in late March that there may be some limits in NIS4™ powered test utilization due to delays potentially experienced by some sponsors as the result of the COVID-19 pandemic.
In August, the Company announced that pivotal data describing the derivation and validation of NIS4™ technology has been accepted for publication by The Lancet Gastroenterology & Hepatology. This published study details NIS4™ algorithm development and clinical validation against the liver biopsy reference standard in two independent populations comprised of data from over 700 patients. In addition to the high overall performance in indentifying patients with at-risk NASH, NIS4™ technology also provided consistent results in critical sub-populations (i.e. diabetic vs. non-diabetic, men vs. women) as compared to other non-invasive tests evaluated in the same individuals.
In September, the Company announced the signature of a new licensing agreement with Labcorp for the development and commercial deployment of an LDT integrating NIS4™ technology on the routine clinical care diagnostic test market in the United States and Canada. GENFIT also continues to explore the possibility to obtain regulatory approval to release an IVD test integrating NIS4™ technology on the US and European markets.
NTZ Development Program in Liver Fibrosis
Despite the COVID-19 pandemic and thanks to the implementation of appropriate measures by the clinical investigator leading the study, the recruitment of patients in the Phase 2 trial evaluating NTZ in NASH-induced liver fibrosis continued throughout the first half of the year.
See also the supplemental Note 6.2 “Major events after the reporting period” to the consolidated H1 2020 financial statements thereafter regarding other events occurring after the reporting period.
Governance
The Company announced, following its annual Shareholders Meeting on June 30, 2020, the appointment of Ms. Katherine Kalin and Mr. Eric Baclet to the company’s Board of Directors. Together, they bring more than 50 years of combined pharmaceutical experience and deep subject matter expertise that will aid in the next phase of GENFIT’s growth.
Ms. Kalin’s healthcare industry expertise spans diagnostics, medical devices, and pharmaceuticals. Ms. Kalin is currently a director on the boards of Clinical Genomics, a molecular diagnostic firm, Brown Advisory, a strategic advisory and investment firm, and Primari Analytics, a startup in artificial intelligence. From 2012-17, Ms. Kalin led corporate strategy at Celgene, a global biopharmaceutical company, for 5 1/2 years. Prior to that, Ms. Kalin held executive leadership roles in marketing, sales, strategy and new business development at Johnson & Johnson (J&J) from 2002 to 2011. Prior to J&J, Ms. Kalin served as a Partner at McKinsey and Company, a global management consulting firm, where she negotiated and led consulting assignments, as a strategic advisor to pharmaceutical, medical device and other healthcare companies.
Mr. Eric Baclet has over 30 years of experience with Eli Lilly in international drug development, management, and commercialization, all expertise he gained as President and General Manager of Lilly Italia, General Manager of Lilly China, VP of Global Marketing, and Executive Directorship of International Marketing, to name a few. Throughout his tenure at Eli Lilly, Mr. Baclet spearheaded international drug launches across multiple geographies, and led multi-disciplinary teams involved in biopharmaceutical value-chain management in more than seven countries.
At the time of this report, the Board of Directors has appointed Ms. Katherine Kalin as a member of the Strategy and Alliances Committee, and Mr. Eric Baclet, as a member of the Nomination and Compensation Committee.
APPENDICES
Half-year Consolidated Financial Results
At June 30, 2020
The Condensed Consolidated Statements of Financial Position, Statements of Operations and Statements of Cash Flow of the Group were prepared in accordance International Financial Reporting Standards (IFRS).
The limited review procedures on the condensed consolidated financial statements have been performed. The half year consolidated financial statements for the period ended June 30, 2020 were approved by Board of Directors on September 29, 2020.
The condensed consolidated financial statements as well as the notes to the consolidated financial statements for the period ended June 30, 2020 and the statutory auditor’s report on the consolidated financial statements are included in appendices of the Half Year Business and Financial Report at June 30, 2020 and available on the “Investors” page of the GENFIT website.
Condensed Consolidated Statement of Financial Position
ASSETS | As of | ||
(in € thousands) | December 31, 2019 | June 30, 2020 | |
Current assets | |||
Cash and cash equivalents | 276 748 | 225 721 | |
Current trade and others receivables | 12 033 | 8 938 | |
Other current assets | 1 968 | 3 540 | |
Inventories | 5 | 5 | |
Total - Current assets | 290 753 | 238 204 | |
Non-current assets | |||
Intangible assets | 920 | 894 | |
Property, plant and equipment | 16 453 | 15 507 | |
Other non-current financial assets | 1 727 | 1 595 | |
Total - Non-current assets | 19 100 | 17 997 | |
Total - Assets | 309 853 | 256 200 | |
SHAREHOLDERS' EQUITY AND LIABILITIES | As of | ||
(in € thousands) | December 31, 2019 | June 30, 2020 | |
Current liabilities | |||
Current convertible loans | 1 313 | 1 313 | |
Other current loans and borrowings | 3 226 | 3 222 | |
Current trade and other payables | 36 917 | 34 961 | |
Current deferred income and revenue | 140 | 141 | |
Current provisions | 2 061 | 2 070 | |
Total - Current liabilities | 43 657 | 41 706 | |
Non-current liabilities | |||
Non-current convertible loans | 164 142 | 166 760 | |
Other non-current loans and borrowings | 14 939 | 13 342 | |
Non-current trade and other payables | 451 | 451 | |
Non-current employee benefits | 1 408 | 1 503 | |
Deferred tax liabilities | 1 193 | 1 057 | |
Total - Non-current liabilities | 182 132 | 183 112 | |
Shareholders' equity | |||
Share capital | 9 715 | 9 715 | |
Share premium | 377 821 | 378 334 | |
Retained earnings (accumulated deficit) | (238 340) | (303 662) | |
Currency translation adjustment | 14 | 7 | |
Net profit (loss) | (65 145) | (53 011) | |
Total shareholders' equity - Group share | 84 065 | 31 382 | |
Non-controlling interests | — | — | |
Total - Shareholders' equity | 84 065 | 31 382 | |
Total - Shareholders' equity & liabilities | 309 853 | 256 200 |
Condensed Consolidated Statement of Operations
For the six-month period ended | |||
(in € thousands, except earnings per share data) | June 30, 2019 | June 30, 2020 | |
Revenues and other income | |||
Revenue | 1 | 122 | |
Other income | 5 356 | 5 745 | |
Revenues and other income | 5 357 | 5 867 | |
Operating expenses and other operating income (expenses) | |||
Research and development expenses | (38 908) | (36 867) | |
General and administrative expenses | (9 517) | (8 251) | |
Marketing and market access expenses | (2 876) | (9 491) | |
Other operating income (expenses) | 7 | (423) | |
Operating income (loss) | (45 936) | (49 163) | |
Financial income | 1 755 | 2 095 | |
Financial expenses | (7 240) | (6 102) | |
Financial profit (loss) | (5 485) | (4 007) | |
Net profit (loss) before tax | (51 422) | (53 170) | |
Income tax benefit (expense) | 289 | 159 | |
Net profit (loss) | (51 132) | (53 011) | |
Attributable to owners of the Company | (51 132) | (53 011) | |
Attributable to non-controlling interests | — | — | |
Basic and diluted earnings (loss) per share | |||
Basic and diluted earnings (loss) per share (€/share) | (1,64) | (1,36) |
Condensed Statement of Cash Flows
For the six-month period ended | For the year ended | For the six-month period ended | |
(in € thousands) | June 30, 2019 | December 31, 2019 | June 30, 2020 |
Cash flows from operating activities | |||
+ Net profit (loss) | (51 132) |
By: GlobeNewswire
- 30 Sep 2020
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