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Edited Transcript of GNFT.PA earnings conference call or presentation 30-Sep-20 8:30pm GMT

·38 mins read

Half Year 2020 Genfit SA Earnings Call (English) Oct 1, 2020 (Thomson StreetEvents) -- Edited Transcript of Genfit SA earnings conference call or presentation Wednesday, September 30, 2020 at 8:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Dean W. Hum Genfit SA - COO * M. Pascal Prigent Genfit SA - CEO * Stefanie Magner ================================================================================ Conference Call Participants ================================================================================ * Aspen Mori BofA Merrill Lynch, Research Division - Associate * Derek Christian Archila Stifel, Nicolaus & Company, Incorporated, Research Division - Director & Senior Analyst * Thomas Jonathan Smith SVB Leerink LLC, Research Division - Director of Immunology and Metabolism & Senior Research Analyst * Wing Cheung Yip H.C. Wainwright & Co, LLC, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the Genfit Half Year 2020 Financial Report and New Corporate Strategy Conference Call. (Operator Instructions) Please note that this conference is being recorded. I will now turn the conference over to our host, Stefanie Magner. Please go ahead. -------------------------------------------------------------------------------- Stefanie Magner, [2] -------------------------------------------------------------------------------- Thank you, and good afternoon, everyone. Thanks for joining us for this first half 2020 financial report and corporate update. We just issued a press release providing our first half financial update, which also included details about our new corporate and strategic road map. This press release can be accessed on our website at ir.genfit.com. During our call, we'll be making forward-looking statements as defined under the U.S. Private Securities Litigation Reform Act of 1995 with respect to Genfit, our expected future performance, business prospects, events and plans, including our new corporate strategy and objectives, potential size of the market for PBC, commercial certainty within this market and the outcome of our later Phase III study of Elafibranor in PBC, timelines for completion of the ELATIVE trial, timelines for the success of the commercial launch of a diagnostic test powered by NIS4 by our 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. These forward-looking statements are based on assumptions and estimates by our management, which although believe to be reasonable, 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. For further discussion of the material risks and other important factors that could affect our business operations and financial results, please refer to those contained in our most recent filings with the SEC and AMF, including our half year report available on our website. These forward-looking statements speak only as of the date of this webcast, 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. Joining me on this call is Pascal Prigent, our CEO. Following the prepared remarks, we'll open up the call for questions that will be addressed by benefit management. (Operator Instructions) I now turn the call over to our CEO, Pascal Prison. -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [3] -------------------------------------------------------------------------------- Thank you, Stefanie, and good afternoon, everyone. Thanks for joining this discussion. The purpose of our webcast today is twofold. First, present the conclusions of the work we did following the announcement of the RESOLVE-IT Phase III results in NASH; and secondly, discuss how the results redefine our corporate strategy and how we see its implementation moving forward. I start with key findings from the in-depth analysis carried out over the summer on the full resulted data set and what this means for Genfit. I will then share our new strategic vision for the future and how a new road map will translate into a new corporate structure and organization. Finally, I'll discuss the financial implications of this plan and our half year perspective. At the end of this call, you should have an understanding of what the coming years will look like for Genfit, and then we'll be happy to take a few questions. Now I will turn to the conclusion from our work on RESOLVE-IT and the additional insights gained from the rigorous analysis we've had on the full data set. As a reminder, the first objective of this data review was to take an in-depth look at the complete data set, analyze [historical] findings as well as biomarker evolution and assess whether there was justification to believe that the study could ultimately prove successful on clinical outcomes. We also wanted to explore the potential of Elafibranor in subpopulation. Although, we did see evidence of activity, we did not see enough to justify continuing the study with a high probability of success. Similarly, we observed positive trends and a stronger response in specific patient groups but not significant enough to justify investing in a new development program. Our second objective was to have a second biopsy read conducted with a renowned histopathologist. We were committed to having a better understanding of this topic because we realized how important it is for the whole NASH community to understand the implications of Inter-reader variability. To date, a sufficient number of biopsies rereads have been performed, which have permitted us to meet 2 objectives: first, complement the existing RESOLVE-IT data set and inform our internal decision making; and secondly, address questions related to Inter-reader variability. At the end of the day, our findings take overs from the Eminent study described in a paper recently published in the Journal of Hepatology, which concluded that the suboptimal reliability of liver biopsy evaluation has implication for randomized clinical trials. In the context of RESOLVE-IT, the CAPA values were too low to draw any specific or new conclusion about the trial outcome and certainly nothing that we could use to support the Subpart H approval. The statistics only confirm that inter-reader variability is a real concern, and we look forward to discussing these findings, along with the rest of the RESOLVE-IT with FDA and the EMA. Moving forward, as stated by Elizabeth (inaudible) in an article from the same issue of Journal of Hepatology. "We believe it will be important for the field to harmonize methodologies, terminologies and expectations for trial assessment." Beyond the additional analysis of RESOLVE-IT, our decision to terminate RESOLVE-IT also factored in the latest NASH development. We considered the FDA feedback regarding the over completed Phase III NASH program, as well as new data from several ongoing NASH programs, and we feel confident we made the right decision. Indeed, clinical trials in the NASH space are large, long and very expensive. Considering the evolving NASH landscape and the results of the analysis from our complete data set, we determined that the cost to probability of success ratio was not acceptable to continued development of Elafibranor in NASH, and officially terminated RESOLVE-IT in line with our earlier guidance in July. Therefore, we are also stopping all clinical investigations related to the development and life cycle of Elafibranor in NASH. This includes combination studies, pediatric studies and the study on lipid composition. Now let's talk about our new corporate strategy. We are choosing to concentrate on 2 programs that both address a significant unmet medical need, represents a significant business opportunity and have a favorable risk profile. The clinical development of Elafibranor as a second-line treatment in PBC and the development of our diagnostic franchise. Let's start with PBC. On September 24, a few days ago, we announced the first patient visit in our ELATIVE Phase III trial, evaluating Elafibranor in PBC. This milestone is now behind us, and we are recruiting patients. We have made the necessary adjustments in collaboration with our CRO to successfully execute in this new COVID world. PBC presents exciting opportunities that are meaningful for patients and for our corporate strategy. Today, in the PBC market, there is only one therapeutic option for second-line therapy after UDCA, and that market is nearly $300 million every year with double-digit growth. The reason we're so excited about this opportunity in PBC is that according to our market research, the second-line PBC market could be over $1 billion in a few years. There is only one approved product in second-line PBC and significant unmet medical needs remain. We feel that Elafibranor, if approved, could be an exciting alternative for patients and health care professionals. Evidence from our Phase II trial give us confidence going into the ELATIVE Phase III trial. Indeed, our Phase II, after 12 weeks, the efficacy with Elafibranor on the composite endpoint was well above what has been required to get an approval in this indication. A positive trend was also observed in pruritus, reinforcing our potential for differentiation. Efficacy looks really good, but what about safety? Well, there are always surprises in clinical development, but we have thousands of patients with years of exposures to Elafibranor, and it has consistently demonstrated a very clean profile. Finally, the commercial solvency is much higher for PBC than in all the liver and metabolic diseases. Patients are easily identifiable with standard lab set, it is a clear treatment regimen, and the cost of second-line therapy is established, allowing us a more streamlined pricing and commercialization strategy. In summary, we see a significant business opportunity in PBC. We are confident that we can have a successful Phase III based on our Phase II trial evidence and with ELATIVE's first patient visit complete and factoring in the constraints of a pandemic, we anticipate Phase III trial results by early '23. Elafibranor has a potential to be a highly competitive second-line therapy with a very differentiated profile in a growing market, estimated to be worth over $1 billion by 2025. Now let's move on to our diagnostic program NIS4. The NIS4 program, as you know, began during the initial work we did on pre-marketing for Elafibranor in NASH. Our markets research highlighted a major challenge with NASH patient diagnosis and also with a key question of which patient should be treated. The emerging medical consensus of treating patients with the disease activity of at least 4 and a fibrosis stage of at least F2 meant that the biopsy would be necessary to provide evidence of disease stage, but we know that these are expensive, resource-intensive and painful procedures. Furthermore, there might be the gold standard from a regulatory standpoint, but they are simply not scalable in real-life to millions of at-risk patients. It is therefore evident to us that the potential NASH market could be huge, but that it would never truly materialize unless a noninvasive solution is developed that can easily be deployed at a large scale. Since the barrier is determining if a given patient with that diagnosed NASH should be treated as opposed to simply diagnostic in with NASH, we launched the NASH diagnostic program to address that one question. Does this patient have at-risk NASH, meaning fibrosis stage 2 above and an activity score of at least 4. NIS4 as a diagnostic technology is a blood test, that is as simple and scalable as it gets. In the second half of 2020, the NIS4 program achieved 2 major milestones. The first 1 was the publication in The Lancet Gastroenterology & Hepatology edition of pivotal data describing the validation process and performance of NIS4. The data showcased the robust and consistent performance of NIS4 to identify patients with at-risk NASH. It also highlighted the performance of NIS4 relative to other technologies, including commonly used liver fibrosis test. This scientific publication is critical as it demonstrates that NIS4 is not just a simple and scalable solution, it is also a high-performance solution that looks at both components of NASH and can aid in identification and therefore, management of patients are at risk. The second milestone was on September 28, 2 days ago, the announcement of an exclusive license agreement with LabCorp to commercialize a novel diagnostic test for NASH, followed by our NIS4 technology. This is a meaningful step for NIS4 development with a large-scale commercial launch, an important progression from our previous collaboration with LabCorp Covance, which focused on the clinical research environment. NIS4 technology will now be made broadly available to the public and start addressing the diagnostic needs of millions of individuals that are at risk of progressing to late-stage complication of NASH. Launch is anticipated in early 2021, and we are looking forward to seeing LabCorp successfully commercialize this solution. The financial terms of the agreement haven't been disclosed, but we do expect revenues in the near term. This licensing agreement is momentous compared to the existing agreement in which LabCorp Covance has been selling NIS4 in the clinical research setting. As a reminder, the scope of the initial agreement was to provide a solution for sponsors running clinical trials in NASH. Pharmaceutical companies that are recruiting NASH patients, screen candidates with biopsies, and the screen failure rate is often close to 70%. That is a lot of useless biopsies, unnecessary pain and risk to patients, as well as significant waste of money at close to $5,000 a biopsy. By using NIS4 as a prescreening tool, sponsors have been able to drastically reduce the number of screen failures, thus, expediting recruitment and saving both time and money as well as better protecting patients. It is a very positive response we got from several major pharma companies and biotech firms that confirm the usefulness of NIS4. It also helped build deeper R&D partnerships and pave the way for a broader launch of NIS4. Although, we do think that the NASH diagnostic market will really take off with the availability of the first NASH drugs. Our market research suggests that there is already an unmet need. So launching NIS4 commercially now makes sense as it will aid physicians and the millions of sick patients, including many prediabetic, diabetic, overweight and obese patients who will benefit from a diagnostic of at-risk NASH. With the diagnosis, health care professional will be more alert for any comorbidities, monitor disease progression and patients can be empowered to make healthier personal choices to diet or exercise. As stated by a patient in a focused group, sometimes the diagnosis can be a powerful motivator. In summary, we see a significant business opportunity with the NIS4 diagnostic and our partner, LabCorp is about to launch and make it available broadly. In a simple and cost-effective way, NIS4 addresses key unmet needs of millions of patients and can be seen as a first step in taking control of the disease. So we have clearly identified 2 clinical program priorities that will be the pillars of our development, PBC and NIS4, but as we execute our strategy, we need a structure that is fit-for-purpose and sustainable, both from a human capital and financial perspective. So let's start with the structure. First, when we look at our 2 main programs, we see little synergies in terms of business models, clients, partnership opportunities, financing or regulatory environment. NIS4 is a diagnostic, Elafibranor and PBC is therapeutic, NIS4 lines with a large NASH market and retail, whereas PBC is an orphan disease with a focus on specialty care. So due to the limited overlap in this key Genfit tenant, we've decided to create 2 separate entities to host these corporate programs with independent teams and corporate branding. The dual-listed parent company will operate to ensure that the potential of each subsidiary is well recognized. There are 3 tangible benefits that will result from this decision. On the commercial side, 2 organizations will support more partnership opportunities. There are certain pharmaceutical organization, some of whom have already expressed interest in co-development of specific NIS4-based development, but we'll be better able to create and execute partnerships outside of a dominant Genfit organization. Second, this will improve operational excellence by having more specialization. Our ability to execute flawlessly is important and streamlining and focusing operation will help us do it. And finally, we also think it will provide more value to stockholders as we believe it will allow for a better visibility and understanding of our diagnostic business. Let me provide a few more details, starting with the diagnostic entity. So at inception that diagnostic entities will be primarily, but not entirely, focused on NASH diagnostic. It will -- I say not entirely because it will also leverage our accumulated knowledge and network in NASH, and it will carry forward valuable tools that have been in development as part of our NASH effort. For example, Genfit has allocated resource to utilize artificial intelligence to address the current challenges of biopsy reading. Also, as a result of our efforts in NASH, we have accumulated a plethora of data that we believe can be leveraged for value-adding patient services. The new diagnostic company will also continue development of an exciting portfolio of products that extend beyond NIS4. Among the key needs that exist in the NASH field is, for example, the ability to monitor disease progression, a solution that will be essential for health care professionals, patients and also payers. The -- another need is the ability to identify with granularity, specific subpopulation of NASH patients, which -- that would be useful, especially for a company launching a product in NASH, but let's say, are targeting a population at a very specific stage of a disease, and we can help them identify those patients. For the drug entity, pretty straightforward, it will initially be focusing on accelerating the execution of our PBC program. But of course, going forward, it will also be the vehicle to develop either new molecules or additional indication for Elafibranor. Let's now talk about our financial perspective, starting with key aspects of the half year 2020 results. So firstly, cash position is at EUR 226 million as of June 30 versus EUR 277 million as of December 31, '19. Secondly, operating income is EUR 5.9 million, was EUR 5.4 million as of June 30, '19. And that comes essentially from the research tax credit, which amounted to EUR 5.2 million for the first half of 2020 -- was EUR 5.3 million in the preceding half year. And then the operating expenses were EUR 55 million, and they were EUR 51.3 million same time last year, about 2/3 of this is R&D expenses. The increase in operating expense is due to increase in marketing and pre-marketing expenses. Obviously, marketing and pre-marketing commercialization expenses will significantly decrease in the second half '20 due to a discontinuation of our pre-commercialization work for Elafibranor in NASH, following the termination of this program in July. General and administrative expenses and research and development expenses have decreased slightly between 2019 and 2020. And these expenses will progressively decrease further as of the second half of 2020, following the company's decision to begin the process of terminating the clinical trials for Elafibranor in NASH and terminating secondary programs, as well as execute the cost saving plan I'm going to detail a little bit more later on. As a result of changes in revenues and expenses, the net loss amounted to EUR 53 million as of June 30, 2020, versus EUR 51.1 million last year and the net loss for the full year 2019 was EUR 65.1 million, all of that in euro. Further information is described in the full consolidated financial statements as well as statutory auditor's report on the consolidated financial statements that are included in the appendices to the 2020 half year business and financial report and also available on the Investors page of a Genfit website. So let me now provide a little bit more color as to what you might expect going forward. And I start by saying the company recognizes the need to rethink our financial strategy in light of our new reality following the RESOLVE-IT results and its broader implication. Specifically, we need to drastically reduce our operating expenses and prepare for the future by restructuring our debt. As mentioned earlier, we decided to terminate all studies related to the launch of Elafibranor in NASH. We also immediately terminated activities related to pre-marketing and launch preparation from supply chain all the way to market access. We then conducted a full review of all of our R&D programs and terminated all projects that were no longer directly relevant to supporting our 2 corporate priorities. Specifically, we stop our ROR gamma program as well as several preclinical projects that were deemed a lower probability of success and provided less value to shareholders. The program that remains under investigation beyond the corporate priorities we already discussed is at NASH fibrosis, which is still being evaluated in an industrial-led proof-of-concept study focused on fibrosis. And the future of this program will be decided once data is available. We are streamlining support functions to align to our new smaller footprint and following the systematic review of operating expenses, we are eliminating all nonessential spend from our satellite office in Paris to our attendance and sponsorship of congresses to just give a few examples. Continuing on the cost savings, we have initiated a workforce reduction program, a restructuring plan that would aim to reduce our total employee footprint from over 200 before the announcement of our Phase III results to less than 125 by year-end, so that's roughly a 40% reduction. So what is the net effect of those initiatives? So in terms of cash burn, we were operating at an annual cash burn of approximately EUR 110 million annually before the RESOLVE-IT announcement. This included the cost of RESOLVE-IT trial and all associated activities related to launch readiness. We expect of these efforts that I just described to allow us to reduce the cash burn to approximately EUR 45 million annually for '22 and beyond. However, the reduction will not be fully realized in 2021. Why? Because RESOLVE-IT is a large and complex trial with a long financial window, mainly due to the burdensome regulatory and administrative processes involved. Our current cost estimates for the closing and full termination of RESOLVE-IT are approximately USD 25 million, and therefore, the cash consumption related to RESOLVE-IT will extend well into 2021. So these projections remain estimates based on reasonable assumptions but they are subject to change. To know that we've reset our corporate strategies, have clear priorities and are aligning our structure and cash burn accordingly, we need to also address our debt. So to that end, Genfit plans to propose to its convertible bondholders and its shareholders an adjustment of the terms of a 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. I will now conclude by saying that Genfit has readjusted its strategy in light of our analysis of the data generated in our NASH Phase III trial. We built on our strengths, and we are confident in this plan that focuses on the development of Elafibranor in PBC and the commercial launch of NIS4. Both programs have promising potential. For PBC, we see a clear regulatory and commercial pathway to a significant market, and we see NIS4 as a key enabler of a NASH market that, yes, is challenging, but where the medical need is real, huge and in dire need of solution. We are streamlining our organizational structure to focus on operational excellence and specialization in both PBC and diagnostics. By reducing our workforce by roughly 40% and our cash burn by over 50%, we are creating a lean and agile organization that is aligned with our revised corporate ambitions. We now look forward to providing additional updates in the coming months on the developments of our program and the implementation of this new corporate strategy. Thank you for joining us today. We appreciate your ongoing support of Genfit and with that, I'd like to thank you for your attention. And let me turn the call over to the operator for Q&A. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Thomas Smith with SVB Leerink. -------------------------------------------------------------------------------- Thomas Jonathan Smith, SVB Leerink LLC, Research Division - Director of Immunology and Metabolism & Senior Research Analyst [2] -------------------------------------------------------------------------------- I have a few. I guess, let me start with the Phase III PBC trial. Can you give us a little color around the rationale for the Elafibranor dose selection in the Phase III? And I guess, what went into the decision to move forward with only the 80 mg dose level? -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [3] -------------------------------------------------------------------------------- Yes. Sure. Thanks, Tom. So I have here with me Deam Hum that you all know. Our Chief Scientific Officer and COO. And I will let him answer that question. -------------------------------------------------------------------------------- Dean W. Hum, Genfit SA - COO [4] -------------------------------------------------------------------------------- So Tom, thanks for the question. And to answer that question, I think we have to come back to the results of our Phase II trial. So remember, the Phase II trial clearly show efficacy of Elafibranor, not only on the primary endpoint, which is alkaline phosphatase, but also hitting positively with high significance on a composite endpoint and that composite endpoint was the one that was used as a surrogate endpoint for registration to the current second-line therapy, but also the same endpoint, which is being used in our pivotal Phase III trial, okay? So remember, the Phase II was run at 2 doses to your point 80 and 120 and you saw as when we presented the data at (inaudible) in 2019, that hits on those endpoints, but also hits on various different markers and there was data showing a potential where we see a trend on pruritus, okay, where Elafibranor fiber had a trend to be beneficial on pruritus. So at those 2 doses of 80, 120, we consistently see equipotent activity across the different markers and across the different endpoints, okay? There were some slight differences, but we think that those differences were related to slight differences in baseline. But having said that, clearly, equal potency between the 2 doses. And when you consider that, we decided to go with a single dose, which is the 80-milligram dose. There's no other reason. As not realizing the way nuclear receptors work, I think what you want to do is to find a dose where you get maximal activity and not go much beyond that to avoid any off-target effects and so on. That's not to say that there we saw any issues. We did not see any safety or tox issues consistent with all the other trials with Elafibranor up to date. So because of the equipotency that we see between the 2 doses, we decided to go with the 80. -------------------------------------------------------------------------------- Thomas Jonathan Smith, SVB Leerink LLC, Research Division - Director of Immunology and Metabolism & Senior Research Analyst [5] -------------------------------------------------------------------------------- Got it. Okay. I guess also in looking on clintrials.gov, it looks like there's a requirement for paired liver biopsy listed as one of the inclusion criteria. Can you talk a little bit about this requirement? Was this something FDA explicitly asked for? If so, why did they ask for this? And then it'd also be helpful to hear your perspective around what kind of impact you think this could have on enrollment? -------------------------------------------------------------------------------- Dean W. Hum, Genfit SA - COO [6] -------------------------------------------------------------------------------- Yes. So Tom, another very good question. So yes, this was a request from the FDA. However, just to be clear, and there are 2 points. Yes, it's a request from the FDA, but it is apparent from our interactions and discussions from the FDA that this requirement is, first of all, not specific to elafibranor, and it's also important to realize that in our ongoing discussions with them, it is also apparent that the FDA is currently requesting liver biopsies in the context of all pivotal PBC trials, okay? The main reason for this is to be able to assess the safety of different drugs developed in PBC, okay? However, having said that, I think it's important to note, although, this was not a specific request for elafibranor, and the main reason, it is based on safety. But remember, elafibranor has a very clean safety profile. We have not seen any safety or tox signals whatsoever throughout the different trials, which have been conducted. But also keep in mind, a lot of the trials we run up to date, we realize -- and I think everyone realizes that we have a large extensive safety database. And again, the totality of the safety database in the case that elafibranor is very well-tolerated with no specific safety concerns. Another important point is that we also have a lot of data coming out of the RESOLVE-IT trial, which is the Phase III trial in NASH, and if you think about biopsy, okay? So remember, in the NASH trial, it was 120 milligrams, we're going to PBC with 80 milligrams. But even with 20 -- 120 milligrams in the NASH trial after treating patients, for semi 2 weeks, we have biopsies from over 900 patients in that trial. And when you look at the biopsy, I mean, it's totally clean. There is no indication of any problems of interface hepatitis or any other safety signal. So I think with such a large database and now with this additional data coming from the biopsies in the NASH trial, of course, what we'll be looking to do is to go back and continue our discussions with the FDA because it's also clear that the agency's thinking regarding the design of clinical trials and PBC is also evolving. So I think it's important for us to continue to have this dialogue with them. The other part of your question, whether this will have an impact on the recruitment of the patients? Yes. I mean, I think we'll have to realize and everyone knows that biopsy is not standard of care in PBC. But having said that, what we're finding from discussions with many investigators is that once they realize the profile of elafibranor based on the efficacy as well as the safety profile as we have shown in our Phase III trial, the investigators, by and large, most of them are very motivated to offer this to their patients in the context of our Phase III. And as we all know, the motivation of the investigators play a big role for the patient to get enrolled into a trial. So does it make it a little bit more difficult? Yes. However, we are cognizant of that and as we continue our discussions with the FDA, we're going to work hard to make sure that we address the recruitment as much as possible. And so I think we just have to get ahead of that and continue our discussions with the agency. -------------------------------------------------------------------------------- Thomas Jonathan Smith, SVB Leerink LLC, Research Division - Director of Immunology and Metabolism & Senior Research Analyst [7] -------------------------------------------------------------------------------- Okay. Okay. I guess just quickly turning to the NIS4 diagnostic and the agreement with LabCorp. Can you just walk us through exactly how -- I guess, you and LabCorp plan to commercialize the products? I mean, what steps need to be completed to gain regulatory approval in the U.S.? And then what's the strategy for driving adoption and reimbursement of the diagnostic? -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [8] -------------------------------------------------------------------------------- So I'm going to take this one, Tom. So first of all, we don't need additional regulatory approval. So now, it's purely marketing. So LabCorp is going to take that marketing effort. We anticipate that they're going to launch probably early into the next year. And when I say launch, it's really their sales force is going to offer this diagnostic to all of their customers in the U.S. first, at least. And essentially, what we're going to do is also help them and try to generate that interest in the market. As I was saying earlier, from a pure commercial standpoint, it is clear that the presence and the launch effort of a drug would really sort of immediately make the need for diagnostic very acute. However, the market research we have and that, obviously, we've shared with LabCorp, is that there is already a need to be fulfilled because it has some value to know whether you're at-risk NASH, and it can be a powerful enabler for patients as well as healthcare professionals. So LabCorp will handle all the marketing, the market access, also working to get this test reimbursed in the U.S. and we'll then -- although we do not disclose the financial terms because that's our core policy, what we can say is that it's a fairly standard licensing deal with like an upfront milestone payments and a royalty that's linked to the portfolio. So that's how it's going to pan out, and we are really excited to see what happens. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Our next question comes from Derek Archila with Stifel. -------------------------------------------------------------------------------- Derek Christian Archila, Stifel, Nicolaus & Company, Incorporated, Research Division - Director & Senior Analyst [10] -------------------------------------------------------------------------------- Just 2 on the ELATIVE study and then one on elafibranor more broadly. So just on the estimated timing for ELATIVE study results, I think you said 2023. Can you give us a sense of how much buffer is in there for COVID but also how much you're allotting for additional time because of the biopsy requirement? The second one on the study would be just around the cost and understanding your cash position. I mean, are you able to fully fund this trial through results based on the current cash that you talked about in cost reduction plan? And then lastly, and kind of the broad thinking of elafibranor now, looking at other indications, mechanistically, where do you think you can play with this molecule? And beyond elafibranor, would you look to in-license additional assets into the portfolio? -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [11] -------------------------------------------------------------------------------- All right. Thanks for these questions, all interesting. So the first one was related to the -- yes, okay, the buffer. Yes, sure. So initially, our vision was that we would need one year for recruitment. And as you can see from the guidance we've given, we have basically have added about 6 months. That's taking into account the COVID constraint. As regards to the biopsy, as Dean mentioned, there are 2 things. So first of all, right now, we feel that the initial enthusiasm is not -- I mean, it's compensating, I guess, for the burden of a biopsy. And going forward, and we hope -- relatively soon, we hope that, that requirement will change based on our ongoing discussion with the FDA and the sharing of the data that Dean alluded to. With regards to the cost, the -- as I mentioned in the talk, there are 2 elements, right? One element is the cost-cutting measures, the other one is the restructuring of the debt. If we do those 2 things, then, yes, we are financing to results. But of course, we need that refinancing of debt because the maturity of the bond currently is October 22, which is before the expected results. Regarding your last question, I will let Dean comment on where we can go mechanistically with elafibranor. With regards to in-licensing, I would just say we'll be open to opportunity. But obviously, we also are focusing our cash towards those 2 programs. So anything we do will have to be sort of cash neutral, right? So Dean, do you want to comment on the... -------------------------------------------------------------------------------- Dean W. Hum, Genfit SA - COO [12] -------------------------------------------------------------------------------- Yes. So I think what's important to keep in mind is that the mechanism of action of elafibranor, it's the dual agonist, which is activating both PPAR alpha and PPAR delta. And remember, in the past, we've spoken quite extensively that elafibranor, we have clear evidence that it is activating and hitting on both PPAR alpha and PPAR delta. What does that mean is that this provides a pluripotent activity, meaning that as the -- to nuclear receptors or activators works in various different pathways and what that leads to is different beneficial activities. When we look at our data in the different trials and including the Phase III trial, we see that elafibranor does have different activities. We see the effect on different inflammation markers as well as different metabolic parameters and so on. So that pluripotent activity is there. So when you think about elafibranor in PBC, I think this pluripotent activity comes and to bear on the use and the potential benefit that we expect to see in PBC patients in the context of our Phase III. I think there are other indications where elafibranor through that mechanism has strong potential to provide some benefit. One that comes to mind is PSC. This is something that's on our radar. We haven't made a decision there yet, but that's one that's potentially interesting for elafibranor. So I would say, some of the things we're thinking about is that other, call it, static diseases. And I know before anyone asked the question, what about combination therapy and things like that? I mean, these are things we continue to think about, but realizing that the NASH space is not a simple and easy straightforward space to move forward in, however, the -- that possibility is there. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Our next question comes from Ed Arce with H.C. Wainwright. -------------------------------------------------------------------------------- Wing Cheung Yip, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [14] -------------------------------------------------------------------------------- This is Thomas Yip. Asking a couple of questions for Ed. So first, for the new -- for the 2 new entities, can you align for us some of the opportunities there to facilitate partnerships for the Mitral program? And would you consider spinning off the NASH diagnostic subsidiary at some points? -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [15] -------------------------------------------------------------------------------- Well, yes, thanks for the question. So I think at this point, it's premature. We're still early in that process. We have our legal team looking at different options. What we do know is that we want to have a separate entities because we feel it will really, as I said, enable a number of things. And the partnership is an important one. At the end of the day, it's always about the value creation for shareholders. And by doing this, we think we can really achieve this. When we say partnership in diagnostic, what we have specifically in mind is a number of companies are not going to go after the entire NASH market, right? They are going to target a specific patient. And the issue of how do you identify this patient is always going to be critical. And of course, all NASH patients look the same and they all feel the same, i.e., they have no symptoms. Because we have a solution that look at both the activity of the disease and the fibrosis, we're able to almost tailor our ID tool with great granularity to a specific patient. So we could develop a specific ID tool for anybody wanting to target a specific patient. Of course, it's a little bit difficult for those companies to truly partner and engage with us if they also see us as a potential competitor. And that's why by having a sort of separate entity developing that part of the business, we feel it's going to be a lot easier. And then, of course, there's a notion of specialization, driving operational excellence. Today, we have a number of personnel that are working on both the drug and the diagnostic so sometimes there are competing priorities. You need to sort of readjust to a new reality when you move from project A to project B. And it's sort of DNA. Sometimes we tend to over-prioritize drug development. So that's why we felt by doing this separation, we would create a lot of value on the diagnostics side, obviously, but also on the drug side because now it's all going to be a matter of operational excellence to get to those results as quickly as possible and execute on recruitment, for example, so we need to get our mind fully aligned with that objective. -------------------------------------------------------------------------------- Wing Cheung Yip, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [16] -------------------------------------------------------------------------------- Thank you so much for aligning the rationale for the new entities. Perhaps a quick one. For the Phase III PBC study, should we expect any data point from DSMB reviews or interim analysis? -------------------------------------------------------------------------------- Dean W. Hum, Genfit SA - COO [17] -------------------------------------------------------------------------------- Yes. I mean, DSMB will be put in place. I think it's reasonable to expect reports or guidance from DSMB feedback. However, there's no interim look on efficacy. -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [18] -------------------------------------------------------------------------------- It's just safety. -------------------------------------------------------------------------------- Dean W. Hum, Genfit SA - COO [19] -------------------------------------------------------------------------------- Just safety. -------------------------------------------------------------------------------- Wing Cheung Yip, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [20] -------------------------------------------------------------------------------- Okay. Finally, one short one financial question. At this point, can you tell us roughly what will the restructuring charges to be in the next 12 months? -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [21] -------------------------------------------------------------------------------- Restructuring charges, from memory? Let me get back to you on this. I don't want to -- I have a number in mind, but I don't want to say something wrong, but we can -- we'll find out and get back to you on this one. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Our next question comes from Geoff Meacham with Bank of America. -------------------------------------------------------------------------------- Aspen Mori, BofA Merrill Lynch, Research Division - Associate [23] -------------------------------------------------------------------------------- It's Aspen on for Geoff. So maybe taking a step back and thinking maybe a little bit longer term, so within the context of this new restructuring plan, maybe you could talk about some long-term plans for your pipeline and maybe some -- maybe a timeline for earlier stage assets, maybe like the NTZ program, when we could see that moving to the clinic and when we might get like some preliminary data from that? -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [24] -------------------------------------------------------------------------------- So I will let you elaborate, Dean. But with regards to the proof of concept, I think we're expecting data Q1 next year. So of course, we'll decide on the future of that program when we have that data. The rest, Dean, do you want to... -------------------------------------------------------------------------------- Dean W. Hum, Genfit SA - COO [25] -------------------------------------------------------------------------------- Yes. I mean, for NTZ, there is a proof of concept that's going on. But Tom (sic) [Aspen], as we're studying more about NTZ looking at potential primary targets and so on, we're learning quite a bit about this drug candidate. We'll be coming out with some public guidance on results, which we are finding right now. But clearly, it's interesting because when we started NTZ, this is coming from a phenotypic screen, and one advantage of doing a phenotypic screen is that you're able to identify potential drug candidates, which work through different mechanisms, which is not necessarily dependent on a single primary target. And our one hypothesis we had was that fibrosis -- remember, we're targeting fibrosis with NTZ, is that fibrosis this could be one of those things where you would get good efficacy by hitting on different primary targets, working through different pathways and so on. And so as we're looking for these primary targets, this is actually appearing to be the case where we are coming up with different mechanisms, multiple mechanisms and multiple primary targets. And when we look into that, I think there are other potential indications for NTZ, which we're considering, are not ready for prime time yet, but we plan to be working through some of those. So above and beyond the readout on the proof of concept trial ongoing now, I think there are other possibilities for NTZ moving forward. -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [26] -------------------------------------------------------------------------------- The other thing I would like to add from a pipeline standpoint, so on diagnostic, right, right now, we have a tool that essentially identified patients with at-risk NASH. But we have a number of R&D program ongoing. One is trying to develop a way to monitor disease progression, which we believe is going to be absolutely key going forward because in disease where you have no symptoms. Payers are going to want to know whether whatever they're paying for is actually working. So monitoring this progression is important. That's one axis of research and as I mentioned, the other one is developing specific ID tool, tailor-made to specific compound based on demand from different sponsors or people willing to launch in NASH. So those are the areas we are currently working on from a diagnostic standpoint. -------------------------------------------------------------------------------- Stefanie Magner, [27] -------------------------------------------------------------------------------- All right. We'll go ahead. Thank you all for your questions. We'll close the Q&A portion of the call now, and I'll hand the back -- call back to Pascal Prigent for closing remarks. -------------------------------------------------------------------------------- M. Pascal Prigent, Genfit SA - CEO [28] -------------------------------------------------------------------------------- All right. Thank you all for joining us today. We are thankful for our team. We appreciate your ongoing support of Genfit during this transitional period as we implement our new corporate strategy. Have a great day. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- All participants disconnect.