What Are The Implications Of A Phase III NASH Delay For Genfit SA (GNFTF)?

Mark Collins  |

French-based biotechnology company Genfit SA (GNFTF) just reported unaudited financial results for the first quarter of 2017, and alongside the numbers, gave markets an update on its lead development program – a phase III study investigating a drug called Elafibranor.

The update detailed a delay in enrollment for the trial against initial target timeframes, and market response to the news has been mixed. Genfit is trading relatively flat on the news, but there are concerns that the delay may translate to a delay in the program as a whole.

Under normal circumstances, a delay of this size (we’ll look at in detail shortly) wouldn't be too much of an issue. A bit of extra time ahead of registration submission, maybe a small added cost of development (minimal dilution, if any), that sort of thing. In this particular instance, however, a delay could have wider implications for the company, and the program in question.

With this in mind, here's a look at what's happened, what it's impact is on the drug and program in question, and why this is a special circumstance in the space.

In its early stages, it's called NAFLD, whereas in its later stages (and in the stages in which it becomes incredibly serious) it turns into NASH. NASH, in particular, is characterized by fibrosis and cirrhosis and can be deadly if left untreated.

Right now, however, there's basically no treatment on the market for the condition. Combine this with the fact that in developed western regions, such as the US and Europe, the disease has a prevalence rate of between 20-40%, and there's a large opportunity for any company that can get a safe and effective treatment on the shelves. Estimates put the market potential at between $20-25 billion at the low end of annual revenues, within ten years.

Of course, this potential hasn’t gone unnoticed. Many reading might already be aware of the scramble that's happening right now to get a treatment to market. Intercept Pharmaceuticals Inc (ICPT), Gilead Sciences, Inc. (GILD), Shire PLC (ADR) (SHPG), Novartis AG (ADR) (NVS) and Allergan plc (AGN) are just some of the biggest names pushing their own NASH candidates towards NDA submission right now, and this is why any delay could be a potential issue for Genfit.

Specifically, the company is regarded as one of the front runners in the space, in terms of getting a treatment in front of the FDA and the EMA for approval. Management has slated 2019 as a target for getting this drug on the shelves. If the trial that's going to support a regulatory submission is delayed, NDA submission could, in turn, be delayed, and this might mean Genfit misses its 2019 target commercialization. This could hand an advantage to any one of the companies mentioned above, and give them a chance to grab a portion of the tens of billions of dollars in new market revenues on offer.

Genfit announced alongside its numbers that the phase III trial for Elafibranor, a trial called RESOLVE-IT, isn’t enrolling as quickly as was first planned.

The trial is split into three separate enrollment groups, designed to allow for a representative spectrum of insight across the various degrees of severity of NASH in the real world. These are F1 fibrosis, which is considered mild, F2 fibrosis, which is considered moderate and F3 fibrosis, which is considered severe.

According to the latest update, F1 fibrosis patients are enrolling as planned. F2 and F3 enrollment, however, is behind schedule. The first phase of the trial requires circa 1,000 patients enrolled across these three groups, so if two out of the three groups fall behind, it's going to take longer to reach the 1,000 threshold and – by proxy – for the company to complete the first stage of the study.

Management suggests that the slower than expected enrollment will put the first stage of the study behind by about four to six months, and that as a result, enrollment in this stage will complete in the first quarter of next year (as opposed to the third quarter of this year).

A few reasons have been given as to why the trial is a bit delayed. First, that it's tough to enroll later stage sufferers right now because of the sheer number of NASH studies being undertaken (as illustrated by the above list of Genfit's competitors). Second, that the company is working to get an accurate demographic representation across its study population, and this focus on accuracy slows things up. In other words, the company could enroll quicker, but the patient population might not be as accurately representative of the real world demographic spread in this indication.

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The first isn’t that important as if Genfit is having trouble, so will the other players in the space. This means that Genfit is probably not going to be the only company to get slightly behind on its enrollment, and if the whole development sector is pushed back a bit, it's not going to drastically change the order of advance into commercialization.

The second, again, isn’t too much of a big deal. When these drugs get in front of the regulatory agencies, attention to detail is going to be important. The FDA knows how many are up for approval near term, and it's only going to want to approve the best. If two drugs perform the same in trials, but one of them investigated the asset in a patient population that's more representative of the real world population, it will have the edge. In a market like this, a small (but at the same time, significant) edge like this could be the difference between a regulatory red and green light.

It's important to note here that – as yet – we don't actually know whether Genfit is on track for its 2019 commercialization target. The delay, so far, is limited to the first stage of the phase III. If the company can make up the time somewhere else, and there's a chance that it can, the delay may not translate to a study outcome delay.

Our final take on this – even if there is a delay, we think it's worth the company ensuring its enrollment is accurate from a demographic perspective, and by proxy, there's value in risking a delay in favor of rushing to enroll a nonrepresentative sample.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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