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GENFIT is often considered as a single product company whose valuation would only depend on the next results of phase 3, but this is not really the case and I thought that a company should necessarily, by good governance, have considered all the possible scenarios in order to prepare for any eventuality.

What are, in my opinion, the scenarios for which the company had to prepare itself:

  1. An industrial accident related to drug safety such as what just happened at CYMABAY.
  2. A failure of the intermediate results of Phase 3.
  3. Mixed Phase 3 results in NASH reversion
  4. Positive Phase 3 results in NASH reversion but not in fibrosis
  5. Positive Phase 3 results in NASH reversion and fibrosis.


Let's try to evaluate the strategies that GENFIT could adopt in these 5 scenarios and their consequences in terms of potential revenues.

As a preamble, it should be recalled that, beyond the NASH market, GENFIT has two other significant potential sources of revenue that could be used, depending on the scenarios, either as a complement or as shock absorbers.  These are the NIS4 diagnostic tests and the treatment of PBC with Elafibranor.

NIS4 diagnostic tests are often considered as a tool developed only to accelerate ELAFIBRANOR's access to the NASH market. It can be seen that for many months, GENFIT's strategy has been to get out of this a priori of the analysts' minds and to set up a communication insisting on the universal nature of the diagnosis, totally independent of the success or failure of the ELAFIBRANOR in NASH.

Some see this communication as a sign of the management team's doubt about their Phase 3 results.

I do not think that this is the case, this communication is only part of good corporate governance, which must consider everything.

It is important for the market to understand that the potential revenue from the tests does not depend on the results that will be published shortly and can serve as a significant buffer in the event of a failure of Phase 3.

What are these potential revenues?

It is never easy to estimate future revenues in a market that does not yet exist, but we will try to approach them based on the information we have.

Recently, the new GENFIT CEO indicated that the expected cost of the test would be close to $200 per unit and that the test should obtain marketing authorization in late 2020 - early 2021.

To date, there is no such advanced concurrent blood test to diagnose patients for treatment. As a result, there is a high expectation among prescribers for a simple diagnostic tool.

In the USA alone, it is estimated that the current population to be treated exceeds 20 million patients. They will therefore have to be identified and tested.

It goes without saying, in my opinion, that practitioners will not decide overnight to test all their overweight patients, they will start with patients with risk profiles like all patients treated for type 2 diabetes.

These patients present an interesting reservoir for initiating a diagnostic campaign, they are at risk, identified and monitored regularly. It is therefore easy to imagine that their attending physician would naturally prescribe a NASH test during their annual visit.

There are 23 million patients treated for type 2 diabetes in the USA alone and the figure is approaching in Europe. If we assume that 50% of these patients are tested each year, we reach a market of nearly 20 million annual tests between the USA and Europe if we add the rest of the world and including China, the futures market (at 5 years) could double.

This would generate a turnover of nearly $4 billion annually, part of which would go to GENFIT (in the absence of information on this specific point, I think it is reasonable to imagine that a quarter of this turnover would go to GENFIT, but I may be wrong).

Let us therefore say that the annual income that GENFIT could earn from the diagnostic tests could be close to one billion euros, minus manufacturing and marketing expenses. This is therefore far from negligible and as a precaution I will limit it to $800 million at first.

There is only one downside to this scenario. If no drugs are available on the market, it will not encourage practitioners to diagnose a disease they cannot treat and it could limit the number of patients tested.

The second independent income that GENFIT could generate from NASH concerns PBC.

GENFIT recently published excellent results in the PBC for ELAFIBRANOR.

The withdrawal of SELADELPAR from the market, the only molecule that could anticipate them with equivalent efficacy, opens a new avenue for them if they confirm these results in phase 3. Access to the PBC market is therefore possible as early as 2023. The qualities of the molecule, its safety profile, its action on pruritus and its effectiveness in reducing alkaline phosphatase (almost twice as effective as OCA) make it a formidable competitor for the only two molecules currently authorized, UDCA and OCA.

The UDCA has long been the only molecule authorized for this pathology, it has fallen into the public domain and is issued in generic form at an average annual cost of about $3,000 to $4,000. This drug will remain a mainstay of treatment for PBC patients for many years to come, but many patients are unresponsive or allergic to this drug, leaving room for an alternative or complementary drug.

The OCA recently obtained a MA but suffers from significant side effects that have led the FDA to impose a safety warning (Black Box) on the packaging of the drug. The announced cost of the annual treatment is very high, announced at $70,000 and its effectiveness is disputed. It benefits from being the only alternative authorised drug to the UDCA. However, a new, safer and more effective drug would sweep it off the market very quickly.

This market is not very important in size, its prevalence is estimated at about 0.05% of the population. Be projected on the USA and Europe, about 400 000 people.

Considering that 50% is correctly treated by the UDCA, there are still about 200,000 patients potentially interested in a new safe and effective drug.

With an average treatment cost of $10,000 per year, this makes for a maximum theoretical market of $2 billion, but in reality, since all patients are not diagnosed, and taking into account the significant implementation of the UDCA, it is better to remain cautious and estimate the US+ Europe market at a maximum of $1 billion.

This niche market is unique in that new drugs targeting it are also being developed to target NASH, which is a mass market. There will therefore be a problem with the price of the treatment. 

It will be difficult if not impossible to sell an expensive molecule to PBC patients simultaneously with the same cheaper molecule to NASH patients.

This is a problem that the INTERCEPT laboratory will quickly encounter with the OCA.  It seems unthinkable that they could attack the NASH market with a $70,000 annual price as they do in the PBC. They will therefore need to have a particularly elaborate pricing strategy in NASH if they are to obtain a MA.

The profile of their drug targeting patients with fibrosis may allow them to position themselves on the most advanced fibrosis with an intermediate rate between $30,000 and $40,000 per year, which would limit their loss of revenue in PBC.  

But these are only assumptions, because if INTERCEPT decided to target all NASH patients with fibrosis, the consensus price would seem closer to $10,000 per year, which would immediately divide their income in the PBC by 6 without NASH's income already being there!  Guaranteed scissor effect.

For GENFIT the problem is different but may arise depending on the scenarios.

If they have a MA in NASH, the profile of the drug considered as a backbone treatment will require them to position themselves around the $10,000 per year mentioned above in NASH and PBC, so revenues in PBC will remain substantial but limited.

But if, unfortunately, the results in NASH did not meet their expectations and therefore they did not obtain MA for this indication, they would be free to position themselves as "first class treatment" in PBC and set their price at $30,000 or $40,000, which would greatly increase their PBC revenues and mitigate the shock of the NASH failure.

This being said, what are the options available to GENFIT for each scenario?

1) An industrial accident related to drug safety such as what just happened at CYMABAY

This is the worst-case scenario because it burdens both the NASH and PBC markets, leaving GENFIT with only the potential revenue from diagnostic tests and slower sales growth as it depends on the arrival on the market of new drugs treating NASH.

It can be estimated that test revenues would peak at $500 million from 2021 to 2023 and could then increase depending on whether or not new tests are introduced to the market.

Estimated average potential annual revenues from 2021 to 2025: $500 million stable

2) A failure of the intermediate results of Phase 3

 This scenario will have to be modulated according to the results, they could be insignificant on the overall population of the study but significant on a sub-population large enough to require a MA. This option is estimated in the following scenario.

In the event that the results do not allow for a MA to be requested, GENFIT would still have the potential revenue from screening tests as estimated in the previous scenario and a potential of nearly $800,000 in the PBC as of 2024 because they could then position themselves on a high selling price in the PBC.

Estimated average potential annual revenues from 2021 to 2023: $500 million

Estimated average potential annual revenues from 2024 onwards: $1200 million stable

3) Positive but mixed Phase 3 results in NASH reversion

 We are in the case where the results could be insignificant on the overall population of the study but significant on a sub-population large enough to request a MA.

A sub-population with advanced NASH NAS 6, 7 or 8 for example would severely limit the target market and would probably require an adaptation of the screening tool.  ELAFIBRANOR would lose its status as a background treatment, which would limit its potential turnover without eliminating it.  Obtaining the MA may also take longer.

An annual income of $500 million from 2024 onwards in NASH would still be possible (we are still talking about income and not turnover).

GENFIT would also have the potential revenue from screening tests and a potential of nearly $400,000 in PBC starting in 2024 as they would have to align their prices with NASH's.

Estimated average potential annual revenues from 2021 to 2023: $500 million

Estimated average potential annual revenues from 2024/2025 onwards: $1,400 million in growth

4) Positive Phase 3 results in NASH reversion but not in fibrosis

This is the scenario on which the core of GENFIT's business strategy is built. In view of the results already obtained, it has a reasonable probability of being achieved.

The process would then be the one set up by GENFIT team.

A single molecule on its market for 2 to 3 years, considered as a disease-modifying treatment and therefore targeting all NASH patients to be treated, a diagnostic tool sized for the target population. A treatment cost around $10,000 per year, a number of patients to be treated of nearly 20 million in the USA alone and almost as many in the enlarged Europe.

Starting from a care rate of 5% in the first few years, which is very reasonable, this makes 1 million patients treated in the USA alone, i.e. $10 billion CA and an income for GENFIT of more than 3 billion depending on the marketing method used (partnership, license or other). The molecule could be combined with other molecules already on the market such as GLP1 analog (personally I am thinking of SEMAGLUTIDE because of its possible oral delivery mode compatible with that of ELAFIBRANOR) which will further expand the target market.

The market for diagnostic kits would then reach its full potential due to the presence of a treatment on the market, whereas the PBC market would be limited by the selling price, which would have to be aligned with that of the NASH market.

Estimated average potential annual revenues USA + EUROPE from 2022 to 2030: 5500 M$ in growth

5 ) Positive Phase 3 results in NASH reversion and fibrosis.

This is the scenario dreamed of by all shareholders, the action on fibrosis will not really change the size of the target population but will facilitate prescriptions and perhaps raise the selling price a little. Above all, it will be an important market barrier against new entrants that will make revenues more reliable over a longer period of time, in my opinion.

Estimated average potential annual revenues USA + EUROPE from 2022 to 2030: $6,000 million in growth


All these estimates are not the result of chance, but as roughly estimated, remain necessarily questionable projections, they do not include the opening of the Chinese market which, by itself, could upset all forecasts.

GENFIT's agreement with TERN on China announces royalties with a double-digit percentage that I personally estimate at around 15%. 

This market will take longer to start but its size is huge and would boost sales from 2027 - 2028. 

Remember that GENFIT owns the rights of its molecule until 2035!

As we have just seen, each scenario significantly modifies GENFIT's revenue forecasts over the next 10 years, however, none of the scenarios leaves GENFIT without revenue.

It will therefore be necessary to see which scenario will be adopted by GENFIT when the interim Phase 3 results will be published (in the next 3 months).

G Divry 2019

Notice that I am neither a physician nor a biologist, my point of view is only that of an enlightened amateur, so it must be taken for what it is, a questionable point o

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