GENFIT: H1 2016 Results: Cash position at end of period at €94M and significant advances in Elafibranor program

GENFIT: H1 2016 Results: Cash position at end of period at €94M and significant advances in Elafibranor program

• Start of active recruiting phase of Phase III pivotal study of Elafibranor in NASH (RESOLVE-IT)

• Preparation of lauch of clincial development of Elafibranor in PBC (Primary Biliary Cholangitis) and pediatric development of Elafibranor in NASH

• Launch of the validation and qualifications programme for an non-invasive NASH diagnostic developed by the CompanyBullet point

Lille (France), Cambridge (Massachusetts, United States), September 26, 2016 - GENFIT (Euronext: GNFT - ISIN: FR0004163111), a biopharmaceutical company at the forefront of developing therapeutic and diagnostic solutions in metabolic and inflammatory diseases, that notably affect the liver or the gastrointestinal system, today announces its financial results for the first half of 2016.  The Half Year 2016 Business and Financial Report was made available to the public and filed with the French market authority (Autorité des marchés financiers) today.  The half year consolidated financial statements are annexed to this press release.

Jean-François Mouney, Chairman & CEO of GENFIT, commented:
"The first half of 2016 was an important period for the Company. 
On the financial front, the capital raise of €49.6 million at the end of February allowed the Company to increase the Group's cash position to approximately €94 million at June 30, 2016.
On the scientific and clinical front, the first half saw the publication of the results of the GOLDEN study in Gastroenterology and the enrollment of the first patients in the pivotal Phase III study of Elafibranor in NASH (RESOLVE-IT) starting in March. 
The Company was also able to actively advance on other Elafibranor development projects, with a view to receiving, in particular, the regulatory authorizations that will allow it to launch a Phase II study in PBC and commence pediatric development in NASH by the end of the year. 
Finally, we wanted to step up the efforts to accelerate the validation of our miRNAs and proprietary algorithms for a non-invasive NASH diagnostic by preparing a large scale qualification program of our tools in multiple patient cohorts managed in expert hepatology clinics across Europe and the United States.  We have high expectations for this program since the success of the first drugs for treating this disease, over and above their intrinsic value, will also be amplified by the availability and the predictive value of non-invasive diagnostic tests which present alternatives to biopsy.
Important advancements are expected in our programs in the coming months, and the end of the year promises significant scientific and clinical news."
Main financial results:
The Consolidated Statement of Financial Position at June 30, 2016 was marked essentially by a well-controlled cash burn, taking into account the capital raise of €49.6 million at the end of February 2016.
Cash at the end of the period amounts to €94.6 million.  This amount does not cover the Company's mid-term financing needs to reach 2019, date at which the Company would anticipate receiving marketing authorization for Elafibranor in NASH.  The Company will thus need to finance this last stage of Elafibranor's clinical development and the progression of its other proprietary programs.  Drivers for this financing could be to raise additional capital and/or sign one or several licensing agreement(s) for one or some of its products.
Key aspects of the Statement of Operations for the first half 2016 are:

• cash and cash equivalents and current financial instruments of €94.6 million at June 30, 2016 (€60.1 million at December 31, 2015);
   
• At the same date, financial liabilities of €6 million (€5.7 million at December 31, 2015);
   
• Operating income of €3.6 million (€2.4 million in the first half 2016) essentially from the Research Tax Credit;
  • Industrial revenues of €0.15 million in the first half 2016 (€0.34 million in the first half 2015) ; this decrease is essentially due to the end of the co-research phase between the Company's and Sanofi's teams in May 2015);
     
• Operating expenses of €16.5 million in the first half 2015 (€11.5 million in the first half 2015) of which 75% represent R&D expenses; and
   
• As a result of changes in revenues and expenses, a net loss of €12.7 million at June 30, 2016 (€8.9 million at June 30, 2015).

The following table summarizes the Consolidated Statement of Operations under IFRS for the first half 2016, with comparative figures for the first half 2015.

The IFRS consolidated financial statements at June 30, 2016 as well as the management discussion of the results, are presented in the appendix at the end of this document.

APPENDICES

GENFIT

Consolidated Half Year
Financial Results
At June 30, 2016

The Statements of Financial Position, Statements of Operations and Statements of Cash Flow of the Group were established pursuant to IFRS accounting standards.
The financial statements at June 30, 2016 were approved by the Executive Board on September 19, 2016 and reviewed by the Supervisory Board on September 23, 2016.

Statement of Financial Position

Statement of Operations

Statement of Cash Flows

Discussion of the results of the first half 2016
Revenue and other income

The Company's revenue and other income results, in particular, from its revenues, government grants, other operating income and the research tax credit.

Revenues and other income amounts to €3,647 thousand at June 30, 2016 compared to €2,409 thousand for the same period in the previous year representing an increase of 51%.

Revenues totaled €151 thousand at June 30, 2016 compared to €395 thousand for the same period in the previous year, or a decrease of 62%.  The decrease in revenues between the two periods is mainly due to the end of the research phase shared by the scientific teams of both parties in the collaborative research alliance with Sanofi, which expired in May 2015. 

Other income, which includes government grants, other operating income, and the Research Tax Credit, totaled €3,495 thousand at June 30, 2016 against €2,014 thousand for the same period in the previous year, or an increase of 74%. This increase is mainly due to the Research Tax Credit, which increased from €1,964 thousand in the first half 2015 to €3,043 thousand in the first half 2016, as a result of, in particular, the increase of research and development expenses in 2016, and in particular, the contracted research and development activities conducted by third parties registered with respect to the RESOLVE-IT Phase III clinical study (see in particular, (ii) "operating expenses and other operating income by destination" below).

Operating expenses and other operating income by destination

The tables below breaks down operating expenses by destination into research and development expenses on the one hand, and general and administrative expenses on the other, for the half years ended June 30, 2015 and 2016.

Operating expenses in the first half 2016 amounted to €16,489 thousand compared to €11,540 thousand in first half 2015, or a 43% increase. They include, in particular:

• research and development expenses, which include the wages and salaries paid to the research staff  (€3,566 thousand at June 30, 2016 compared to €3,796 thousand at June 30, 2015), the cost of consumables and operational outsourcing (particularly clinical and pharmaceutical representing €6,226 thousand at June 30, 2016 compared to €2,997 thousand at June 30, 2015), and expenses related to intellectual property. These research and development expenses amounted to €12,323 thousand at June 30, 2016 against € 9,008 thousand at June 30, 2015), or 75% and 78% of operating expenses, respectively.

The first half 2016 was a transitional period with respect to operational outsourcing costs related to Elafibranor's development as it was marked by the launch of the pivotal Phase III study (RESOLVE-IT).  Furthermore, other programs also generated operational outsourcing costs in the first half 2016, but in smaller amounts than those related to the development of Elafibranor because they are at an earlier stage in their development.

The expenses for personnel assigned to research in the first half 2015 included €1,147 thousand correspondence to IFRS expenses related to the granting of equity warrants (BSA) and redeemable warrants (BSAAR).  Excluding these expenses, expenses for research personnel went from €2,649 thousand in the first half 2015 to €3,566 thousand in the first half 2016, an increase of 35%.  This change is due to the increase in research personnel (83 versus 71) and the impact of bonuses granted to certain of these employees related to the implementation of the incentive plan in the first half 2016; and    

• general and administrative expenses, which include the costs of personnel not assigned to research (€2,202 thousand at June 30, 2016 against €1,549 thousand at June 30, 2015), and the administrative and commercial costs. These general and administrative expenses amounted to €4,166 thousand in the first half 2016 compared with €2,498 thousand in the first half 2015, or 25% and 22% of operating expenses, respectively.

The expenses for personnel not assigned to research in the first half 2015 included €640 thousand corresponding to IFRS expenses related to the granting of BSAAR and BSA.  Excluding these expenses in the first half 2015, expenses for research personnel went from €909 thousand in the first half 2015 to €2,202 thousand in the first half 2016, an increase of 142%.  This change is due to the increase in personnel not assigned to research (25 versus 19) and the impact of bonuses granted to certain of these employees related to the implementation of the incentive plan in the first half 2016.    

Operating expenses and other operating income by type

Broken down by type instead of by destination, operating expenses mainly included the following:

Contracted research and development activities conducted by third parties

Contracted research and development activities conducted by third parties amounted to €6,226 thousand in the first half 2016 against €3,045 thousand in the first half 2015, corresponding to a 104% increase, which is mainly due to the launch of the pivotal Phase III study (RESOLVE-IT) in Elafibranor.  The Company expects this expense item to increase substantially starting from the second half of 2016 in conjunction with the progression of the RESOLVE-IT study.

Employee expenses

Employee expenses amount to €5,768 thousand in the first half 2016 compared to €5,346 thousand in the first half 2015, or a 9% increase.

Among these expenses, the amount of wages and social security charges increased from €3,559 thousand in the first half 2015 to €5,768 thousand in the first half 2016, or an increase of 62%.  This change is due to an increase in headcount (108 versus 90) and the impact of bonuses granted to certain of these employees related to the implementation of the incentive plan in the first half 2016.

The amount recognized as share-based compensation (BSAs and BSAARs) free of any impact on cash flow increased from €1,787 thousand in the first half 2015 to €0 thousand in the first half 2016, since the Company had not allocated any instruments in the first half 2016.  For more information, see note 6.20 to the half year 2016 consolidated financial statements.

Other expenses

Other expenses amount to €3,152 thousand in the first half 2016 compared to €1,857 thousand in the first half 2015. They include, in particular:

• "fees," which include legal, audit, and accounting fees, the fees of various advisors (press relations, investor relations, communication, IT), the external staff seconded to the Company (guard, security and reception), as well as the fees of some of its scientific advisers.  This amount also includes Intellectual Property expenditures corresponding the fees incurred by the Company in connection with the registration and protection of its patents;

• expenses related to the rental, use, and maintenance of its registered offices, and rental of offices in the United States;

• expenses related to business travel and conferences, which essentially include the staff's travel expenses as well as the costs of participation in scientific, medical, financial, and business development conferences.

This change is mainly due to the Group's business' faster pace of development and its stronger presence in the United States.

Financial income
Financial income totals € 181 thousand in the first half 2016 compared to €260 thousand in the first half 2015.
This decrease is due, in particular, to a decrease in financial revenue from €329 thousand in the first half 2015 to €278 thousand in the first half 2016, which was mainly the result of a decrease in interest rates of the investment vehicles and an increase in financial expenses which went from €69 thousand at June 30, 2015 to €97 thousand at June 30, 2016.
Net income

The first half 2016 resulted in a net loss of € 12,662 thousand compared to a net loss of € 8,871 thousand in the first half 2015.

Balance sheet items
At June 30, 2016, the total amount of the Group's Statement of Financial Position amounts to €107,789 thousand compared to € 69,258 thousand at December 31, 2015.
Non current assets

Non-current assets, which include goodwill and intangible, tangible, and financial assets, increase from €2,505 thousand as of December 31, 2015 to €2,959 thousand at June 30, 2016.  This increase is mainly due to investments made in the first half 2016 (IT, telecommunications and scientific equipment).
Current assets

Current assets amount to €104,829 thousand at June 30, 2016 compared to €66,753 thousand as of December 31, 2015. 
The variation of trade and other receivables is justified by the receivables related to the research tax credit for the fiscal years 2014 and 2015 and the first half 2016.  For the 2014 fiscal year, the French tax administration partially repaid in advance the research tax credit, after deduction as a precautionary measure, of the tax adjustment of €1,141 thousand that the Company contests and which remain due.
For the 2015 fiscal year, the Company's request for repayment in advance of the research tax credit is under review by the French tax administration.
The variation of trade and other receivables corresponds to the increase in expenses recognized in advance related to current operating expenses.
Cash and cash equivalents increased from €60,111 thousand at December 31, 2015 to €94,640 thousand at June 30, 2016, an increase of 57%.  Available cash is mainly invested in highly liquid short-term investments presenting low risk of change in value.

Shareholders' equity

As of June 30, 2016, the amount of the Group's shareholders' equity totaled €90,726 thousand against € 55,416 thousand as of December 31, 2015. 
The change in the Company's shareholders' equity is mainly due to the share capital increase carried out during the first half 2016, and the half year loss, which reflects the Company's efforts in research and development, the completion of preclinical studies, and the clinical studies for Elafibranor.
Non current liabilities

This mainly concerns the following liabilities reaching maturity in more than one year:

• conditional advances granted to GENFIT SA by Bpifrance for the purpose of financing the Company's research programs; and
• bank loans.

Current liabilities

This balance sheet item mainly includes liabilities reaching maturity in less than one year, such as conditional advances granted by Bpifrance to GENFIT, the development loan with a participation feature granted by Bpifrance, trade payables, and social security expenses. Changes in current liabilities are essentially due to, as indicated above, the increase in trade payables related to the increase in contracted research and development activities.

Subsequent events to June 30, 2016
With effect from July 1, 2016, GENFIT SA decided to finance the creation by Pinnacle Clinical Research a registry of NAFLD/NASH patients. This donation, for a maximum amount of approximately USD$ 1.6 million will be paid over the course of 18 months.
These patients will have access to state of the art medical care by specialized clinics participating in this initiative.  The data compiled will assist in informing the medical field about the prevalence, evolution and progression of and co-morbidities associated with the disease.  GENFIT will have access to de-identified data allowing it to reinforce its own understanding of these diseases and continue its own disease awareness work.
In addition, the Company announced the results of the first analysis of the validation tests in biomarkers (miRNAs) identified in its BMGFT303 program, from a cohort of highly obese patients (NASH and non NASH) at the Antwerp University: these initial analyses validated the predictive value of miRNAs as biomarkers in NASH.
The Company opened a secondary office in Paris with 150m² of leased office space.

Half Year Business and Financial Report
The Half Year 2016 Business and Financial Report was published today on the Company's website in the Financial Reports and Releases tab in the Documentation Center (http://www.genfit.com/investors/documentation-center/).

About Elafibranor:

Elafibranor is GENFIT's lead pipeline product. Elafibranor is an oral once-daily treatment, and a first-in-class drug acting via dual peroxisome proliferator-activated alpha/delta pathways developed to treat, in particular, nonalcoholic steatohepatitis (NASH). Elafibranor is believed to address multiple facets of NASH, including inflammation, insulin sensitivity, lipid/metabolic profile, and liver markers.
About NASH:

"NASH", or nonalcoholic steatohepatitis, is a liver disease characterized by an accumulation of fat (lipid droplets), along with inflammation and degeneration of hepatocytes. The disease is associated with long term risk of progression to cirrhosis, a state where liver function is diminished, leading to liver insufficiency, and also progression to liver cancer.

About PBC:

"PBC" or Primary Biliary Cholangitis, is a chronic disease in which bile ducts in the liver are gradually destroyed. The damage to bile ducts can inhibit the liver's ability to rid the body of toxins, and can lead to scarring of liver tissue known as cirrhosis. 
About GENFIT:

GENFIT is a biopharmaceutical company focused on the discovery and development of drug candidates in areas of high unmet medical needs corresponding to a lack of suitable treatment and an increasing number of patients worldwide. GENFIT's R&D efforts are focused on bringing new medicines to market for patients with metabolic, inflammatory, autoimmune and fibrotic diseases, that affect the liver (such as NASH - Nonalcoholic steatohepatitis) and more generally the gastro-intestinal arena. GENFIT's approach combines novel treatments and biomarkers. Its lead proprietary compound, Elafibranor, is currently in a Phase 3 study. With facilities in Lille, France, and Cambridge, MA (USA), the Company has approximately 110 employees. GENFIT is a public company listed in compartment B of Euronext's regulated market in Paris (Euronext: GNFT - ISIN: FR0004163111). www.genfit.com
Forward Looking Statement / Disclaimer:
This press release contains certain forward-looking statements. Although the Company believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those 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 biomarkers, progression of, and results of clinical data from, the RESOLVE-IT trial, review and approvals by regulatory authorities, such as the FDA or the EMA, regarding in particular, Elafibranor in NASH and PBC, as well as other indications, and biomarkers, the success of any inlicensing strategies, the Company's continued ability to raise capital to fund its development, as well as those discussed or identified in the Company's public filings with the AMF, including those listed under Section 7 "Main Risks and Uncertainties"of the Company's Half Year 2016 Business and Financial Report, which is available on GENFIT's website (www.genfit.com) and on the website of the AMF (www.amf-france.org). Other than as required by applicable law, the Company does not undertake any obligation to update or revise any forward-looking information or statements.
This press release and the information contained herein do not constitute an offer to sell or a solicitation of an offer to buy or subscribe to shares in GENFIT in any country. This press release has been prepared in both French and English. In the event of any differences between the two texts, the French language version shall supersede.

CONTACT
GENFIT | Jean-François Mouney - Chairman & CEO | Ph. +333 2016 4000
MILESTONES - Press Relations | Bruno Arabian | Ph. +331 8362 3484 / +336 8788 4726 - barabian@milestones.fr