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) |
(65 145) |
(53 011) |
+
Non-controlling interests |
— |
— |
— |
Reconciliation of net loss to net cash used in operating
activities |
|
|
|
Adjustments
for: |
|
|
|
+
Depreciation and amortization on tangible and intangible
assets |
1 542 |
3 263 |
1 737 |
+
Impairment and provision for litigation |
1 804 |
357 |
124 |
+
Expenses related to share-based compensation |
356 |
1 657 |
513 |
- Gain on
disposal of property, plant and equipment |
(1) |
(19) |
(2) |
+ Net
finance expenses (revenue) |
5 669 |
11 437 |
5 848 |
+ Income
tax expense (benefit) |
(289) |
(576) |
(159) |
+ Other
non-cash items including Research Tax Credit litigation |
(11) |
1 702 |
92 |
Operating cash
flows before change in working capital |
(42 063) |
(47 324) |
(44 859) |
Change
in: |
|
|
|
Decrease
(increase) in trade receivables and other assets |
(10 103) |
(1 640) |
1 523 |
(Decrease)
increase in trade payables and other liabilities |
5 307 |
1 284 |
(2 026) |
Change in
working capital |
(4 797) |
(356) |
(504) |
Income tax
paid |
— |
— |
— |
Net
cash flows used in operating activities |
(46 859) |
(47 680) |
(45 362) |
Cash
flows from investment activities |
|
|
|
-
Acquisition of property, plant and equipment |
(65) |
(2 030) |
(785) |
+
Proceeds from disposal of / reimbursement of property, plant and
equipment |
(0) |
2 517 |
— |
-
Acquisition of financial instruments |
(128) |
(160) |
(49) |
Net
cash flows provided by (used in ) investment
activities |
(193) |
327 |
(834) |
Cash
flows from financing activities |
|
|
|
+
Proceeds from issue of share capital (net) |
126 479 |
126 486 |
— |
+
Proceeds from subscription / exercise of share warrants |
— |
43 |
— |
+
Proceeds from new loans and borrowings net of issue costs |
— |
— |
— |
-
Repayments of loans and borrowings |
(1 513) |
(1 884) |
(1 601) |
-
Financial interests paid (including finance lease) |
(3 234) |
(7 785) |
(3 230) |
Net
cash flows provided by (used in ) financing
activities |
121 732 |
116 860 |
(4 831) |
Increase (decrease) in cash and cash
equivalents |
74 680 |
69 508 |
(51 027) |
Cash
and cash equivalents at the beginning of the period |
207 240 |
207 240 |
276 748 |
Cash
and cash equivalents at the end of the period |
281 920 |
276 748 |
225 721 |
Discussion of
the 2020 half year results
Comments on the condensed statement of
net income for the periods ended June 30, 2019 and June 30,
2020
(i)
Revenue and other income
The Company's revenue and other income results
primarily from the research tax credit.
Revenue
and other income |
For the six-month period ended |
|
(in € thousands) |
June 30, 2019 |
|
June 30, 2020 |
Revenues |
1 |
|
122 |
Government
grants and subsidies |
2 |
|
3 |
CIR tax
credit |
5 350 |
|
5 224 |
Other operating
income |
4 |
|
519 |
TOTAL |
5 357 |
|
5 867 |
Revenue and other income was € 5,867 thousand at
June 30, 2020 compared to €5,357 thousand for the same period in
the previous year.
(ii)
Operating expenses and other operating income by
destination
The tables below break down operating expenses
by destination mainly into research and development expenses on the
one hand, marketing and pre-marketing and general and
administrative expenses on the other, for the half years ended June
30, 2020 and 2019.
|
|
|
|
|
|
Contracted |
|
|
|
|
Gain / |
|
|
|
|
research and |
|
Other |
|
Depreciation, |
(loss) on |
|
For the |
|
|
development |
|
expenses |
|
amortization |
disposal of |
|
six-month period |
|
|
activities |
|
(maintenance, |
|
and |
property, |
Operating expenses and other operating income
(expenses) |
ended |
|
|
conducted by |
Employee |
fees, travel, |
|
impairment |
plant and |
(in € thousands) |
June 30, 2019 |
|
|
third parties |
expenses |
taxes…) |
|
charges |
equipment |
Research and
development expenses |
(38 908) |
|
|
(25 909) |
(6 206) |
(2 564) |
|
— |
— |
General and
administrative expenses |
(9 517) |
|
|
(1) |
(4 082) |
(5 244) |
|
— |
— |
Marketing and
market access expenses |
(2 876) |
|
|
— |
(883) |
(1 963) |
|
— |
— |
Other operating
income and (expenses) |
7 |
|
|
— |
— |
6 |
|
1 |
1 |
TOTAL |
(51 293) |
|
|
(25 910) |
(11 170) |
(9 764) |
|
1 |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted |
|
|
|
|
Gain / |
|
|
|
|
research and |
|
Other |
|
Depreciation, |
(loss) on |
|
For the |
|
|
development |
|
expenses |
|
amortization |
disposal of |
|
six-month period |
|
|
activities |
|
(maintenance, |
|
and |
property, |
Operating expenses and other operating income
(expenses) |
ended |
|
|
conducted by |
Employee |
fees, travel, |
|
impairment |
plant and |
(in € thousands) |
June 30, 2020 |
|
|
third parties |
expenses |
taxes…) |
|
charges |
equipment |
Research and
development expenses |
(36 867) |
|
|
(24 337) |
(6 591) |
(3 287) |
|
(1 455) |
— |
General and
administrative expenses |
(8 251) |
|
|
(42) |
(3 845) |
(3 963) |
|
(269) |
— |
Marketing and
market access expenses |
(9 491) |
|
|
(1) |
(744) |
(8 697) |
|
(44) |
— |
Other operating
income (expenses) |
(423) |
|
|
— |
— |
(425) |
|
— |
2 |
TOTAL |
(55 031) |
|
|
(24 379) |
(11
180) |
(16 372) |
|
(1 769) |
2 |
Operating expenses in the first half 2020
amounted to €55,031 thousand compared to €51,293 thousand in first
half 2019.
They include, in particular:
·research and
development expenses, which include employee-related
expenses for employees in research and development functions
(€6,591 thousand at June 30, 2020 compared to €6,206 thousand at
June 30, 2019), the cost of consumables and contracted research and
development activities (particularly clinical and pharmaceutical
expenses) (representing €25,534 thousand at June 30, 2020 compared
to €26,977 thousand at June 30, 2019) and expenses related to
intellectual property. These research and development expenses
amounted to €36,867 thousand at June 30, 2020 compared to €38,908
thousand at June 30, 2019, or 67% and 76% of operating expenses,
respectively. The
decrease in contracted research and development expenses is mainly
due to the suspension or termination of some clinical studies in
the context of the COVID-19
pandemic. Changes
in employee-related expenses for employees in research and
development functions is mainly due to increased headcount (128 vs.
116), compensated by the absence of incentive bonuses in
2020. The
decrease in amortization and provisions related to research and
development is mainly due to the provisions recorded in the dispute
with the tax authorities concerning the CIR in 2019 and the
application as from January 1, 2019 of IFRS 16 to leases.
·general and
administrative expenses, which include the costs of
personnel not assigned to research (€3,845 thousand at June 30,
2020 compared to €4,082 thousand at June 30, 2019), and
administrative costs. These general and administrative expenses
amounted to €8,251 thousand in the first half 2020 compared with
€9,517 thousand in the first half 2019, or 15% and 19% of operating
expenses,
respectively. Changes
in general and administrative expenses are mainly related to the
cost of insurance premiums in relation to Company listing on the
Nasdaq. Changes
in employee-related expenses paid to employees in general and
administrative functions was primarily the result of an increase in
headcount (68 vs. 51 employees), compensated by the absence of
incentive bonuses in
2020. ·marketing
and pre-marketing expenses, which include the costs of
personnel assigned to marketing and business development (€744
thousand in the first half 2020 compared to €883 thousand in the
first half 2019), and costs related to the preparation of the
commercialization of elafibranor and NIS4™ in NASH (market
research, marketing strategy, medical communication, market
access…) (€9,491 thousand in the first half 2020 compared to €2,876
thousand 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. (iii)
Operating expenses by type
Broken down by type instead of by destination,
operating expenses mainly included the following:
Contracted research and development
activities
Contracted research and development expenses
amounted to €24,379 thousand in the first half 2020 compared to
€25,910 thousand in the first half 2019, corresponding to a 6%
decrease, which is mainly due to the suspension or discontinuation
of some studies in the context of the COVID-19 pandemic.
Employee expenses
Employee expenses |
For the six-month period ended |
(in € thousands) |
June 30, 2019 |
|
June 30, 2020 |
Wages and
salaries |
(7 998) |
|
(7 811) |
Social security
costs |
(2 748) |
|
(2 770) |
Changes in
pension provision |
(69) |
|
(87) |
Individual
training entitlement |
— |
|
— |
Share-based
compensation |
(356) |
|
(513) |
TOTAL |
(11 170) |
|
(11 180) |
Employee expenses excluding share-based
compensation amounted to €10,667 thousand in the first half 2020
compared to €10,814 thousand in the first half 2019, or a 1%
decrease, mainly due to the absence of incentive bonuses in 2020
despite an increase in headcount (203 vs. 174 employees)
The amount recognized as share-based
compensation (BSA, BSAAR, SO and AGA) free of any impact on cash
flow amounted to €513k in the first half 2020 compared to €356
thousand in the first half 2019. The expenses recorded in the first
half of 2020 relate to the SO and AGA plans put in place in
December 2016, the BSA, SO and AGA plans put in place in 2017, the
SO and AGA plans put in place in 2018 and the BSA, SO and AGA plans
put in place in 2019.
Other expenses
Other expenses amount to €16,372 thousand in the
first half 2020 compared to €9,764 thousand in the first half 2019.
They include, in particular:
- "fees," which include legal, audit, and accounting, the fees of
various advisors (press relations, investor relations,
communication, IT), as well as the fees of certain scientific
advisers. This amount also includes intellectual property
expenditures corresponding to fees incurred by the Company in
connection with the registration and protection of its
patents;
- insurance premiums specific to the listing of the Company’s
shares on Nasdaq: a recurring Directors & Officers civil
liability insurance policy;
- expenses related to the pre-marketing of elafibranor and NIS4™
in NASH (market research, marketing strategy, medical
communication, market access…);
- expenses related to the use and maintenance of Group
offices;
- expenses related to external service providers (guard,
security, reception, clinical trial management and IT);
and
- expenses related to business travel and conferences mainly for
employees as well as the costs of participation in scientific,
medical, financial, and business development conferences.
These changes are mainly related to increases in
expenses for pre-marketing projects.
(iv)
Financial income (expense)
Financial income (expense) as of June 30, 2020
amounted to a loss of €4,007 thousand compared to financial loss of
€5,485 thousand in the previous half year.
This change is mainly due to realized and
unrealized foreign currency exchange rate loss of €246k in the
first half 2020 compared to €1,563k in the first half 2019,
partially compensated a notable increase in financial income
(€1,154k in the first half 2020 compared to €103k in the first half
20191) due to the increase of cash held in US dollars and to
investments in US dollars where the return has been significantly
higher than investments in euros.
(v)
Net income (loss)
The first half 2020 resulted in a net loss of
€53,011 thousand compared to a net loss of €51,132 thousand in the
first half 2019. The net loss for the 2019 fiscal year amounted to
€65,144 thousand.
Comments on the Group’s Statement of
Financial Position at June 30, 2020
At June 30, 2020 the total amount of the Group's
Statement of Financial Position amounted to €256,200 thousand
compared to €309,853 thousand as of December 31, 2019.
At June 30, 2020, the Group’s cash, cash
equivalents and other financial assets amounted to €227,316
thousand, compared to €278,474 thousand as of December 31,
2019.
(i)
Non current assets
Non-current assets, which include trade and
other receivables, goodwill and intangible, tangible, and financial
assets, decrease from €19,100 thousand as of December 31, 2019 to
€17,997 thousand at June 30, 2020.
(ii)
Current assets
Current assets amounted to €238,204 thousand at
June 30, 2020 compared to €290,753 thousand as of December 31,
2019.
Cash and cash equivalents went from €276,748
thousand at December 31, 2019 to €225,721 thousand at June 30,
2020, or a decrease of 18%. Cash is mainly placed in low risk,
highly-liquid short term investments.
The variation of trade and other receivables is
mainly due to the recognition of the estimated amount of the
Research Tax Credit receivable for the first half 2020 and the
repayment of the Research Tax Credit for 2019 during the first half
2020. Additional details regarding these receivables are provided
in note 6.9 to the 2020 half year consolidated financial
statements.
The variation of trade and other receivables
corresponds to the increase in expenses recognized in advance
related to current operating expenses. This increase follows
the increase in operating expenses in the first half 2020.
(iii)
Shareholders’ equity
As of June 30, 2020, the Group's shareholders'
equity totaled €31,382 thousand compared to €84,065 thousand as of
December 31, 2019.
The change in the Company's shareholders' equity
is mainly due to the recognition of the half year loss reflecting
the Company’s efforts in research and development, carrying out
pre-clinical studies, and clinical studies related to
elafibranor.
The Notes to the 2020 half year consolidated
financial statements included herein, as well as the Table of
Changes in Shareholders' Equity established under IFRS provide
details on the change in the Company's share capital and the
Group's shareholders' equity, respectively.
(iv)
Non current liabilities
This mainly concerns:
·The
convertible bond (OCEANE) issued in October 2017 and due October
2022;As well as the part of contractual obligations of the
following liabilities reaching maturity in more than one year:
- A conditional advance granted to GENFIT SA by Bpifrance for the
purpose of financing the research programs detailed in Note
6.12.2.1 "Refundable and Conditional Advances" of the notes to the
2020 half year consolidated financial statements included herein;
and
- bank loans; and
- and the debt related to operating leases pursuant to IFRS 16,
as of January 1, 2019.
- Current liabilities
Liabilities - Current |
|
(in € thousands) |
December 31, 2019 |
June 30, 2020 |
Current
convertible loans |
1 313 |
1 313 |
Current other
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 |
43 657 |
41 706 |
This balance sheet item mainly includes interest
payments on the OCEANE due October 2022, bank loans and trade and
social security payables and debts under operating leases. Changes
in current liabilities are mainly due to changes in contracted
research and development activities expenses.See also notes 6.12
and 6.13 to the consolidated financial statements for the first
half of 2020 below.
ABOUT GENFIT
GENFIT is a late-stage biopharmaceutical company
dedicated to improving the lives of patients with metabolic and
liver diseases. GENFIT is a pioneer in the field of nuclear
receptor-based drug discovery, with a rich history and strong
scientific heritage spanning more than two decades. GENFIT
initiated a Phase 3 clinical trial of elafibranor in patients with
primary biliary cholangitis (PBC). As part of GENFIT’s
comprehensive approach to clinical management of patients with
liver disease, the Company is also developing NIS4™, a new,
non-invasive blood-based diagnostic technology which, if approved,
could enable easier identification of patients with at-risk NASH.
GENFIT has facilities in Lille and Paris, France, and Cambridge,
MA, USA. GENFIT is a publicly traded company listed on the Nasdaq
Global Select Market and on compartment B of Euronext’s regulated
market in Paris (Nasdaq and Euronext: GNFT). www.genfit.com
FORWARD LOOKING STATEMENTS
This press release contains certain
forward-looking statements, including those within the meaning of
the Private Securities Litigation Reform Act of 1995, with respect
to GENFIT, including statements about GENFIT’s new corporate
strategy and objectives, the potential size of the market for PBC,
commercial certainty within this market and the outcome of the
ELATIVE phase 3 trial of elafibranor in PBC, timelines for
completion of the ELATIVE trial, timelines for and success of a
commercial launch of a diagnostic test powered by NIS4 by GENFIT’s
partner LabCorp, the success and benefits of corporate
restructuring projects, including a workforce reduction program,
our ability to significantly reduce operating expenses, our
projected cash burn over the next several years and our ability to
adjust the terms of our convertible bond. The use of certain words,
including “believe,” “potential,” “expect” and “will” and similar
expressions, is intended to identify forward-looking
statements. Although the Company believes its expectations
are based on the current expectations and reasonable assumptions of
the Company’s management, these forward-looking statements are
subject to numerous known and unknown risks and uncertainties,
which could cause actual results to differ materially from those
expressed in, or implied or projected by, the forward-looking
statements. These risks and uncertainties include, among other
things, the uncertainties inherent in research and development,
including related to safety, biomarkers, progression of, and
results from, its ongoing and planned clinical trials, review and
approvals by regulatory authorities of its drug and diagnostic
candidates and the Company’s continued ability to raise capital to
fund its development, as well as those risks and uncertainties
discussed or identified in the Company’s public filings with the
French Autorité des marchés financiers (“AMF”), including those
listed in Section 2.1 “Main Risks and Uncertainties” of the
Company’s 2019 Universal Registration Document filed with the AMF
on May 27, 2020 under n° D.20-0503, which is available on GENFIT’s
website (www.genfit.com) and on the website of the AMF
(www.amf-france.org) and revised as indicated in Section 8 of the
Half-Year Business and Financial Report as of June 30, 2020. and
public filings and reports filed with the U.S. Securities and
Exchange Commission (“SEC”), including the Company’s 20-F dated May
27, 2020. In addition, even if the Company’s results, performance,
financial condition and liquidity, and the development of the
industry in which it operates are consistent with such
forward-looking statements, they may not be predictive of results
or developments in future periods. These forward-looking
statements speak only as of the date of publication of this
document. Other than as required by applicable law, the Company
does not undertake any obligation to update or revise any
forward-looking information or statements, whether as a result of
new information, future events or otherwise.
GENFIT CONTACT
GENFIT | Investors
Naomi EICHENBAUM – Investor Relations | Tel: +1
(617) 714 5252 | investors@genfit.com
PRESS RELATIONS | Media
Hélène LAVIN – Press Relations | Tel: +3 33 2016
4000 | Helene.lavin@genfit.com
GENFIT | 885 Avenue Eugène Avinée, 59120
Loos - FRANCE | +333 2016 4000 |
www.genfit.com
1 Note: the impact of the
reclassification of foreign exchange income from trade receivables
recognized as "other income" for the first half of 2020 while these
gains were recognized as "financial income" in the first half of
2019 (see note 17 to the 2020 half year condensed consolidated
financial statements)
- GENFIT: First Half-Year 2020 Financial Report and New Corporate
Strategy