Genfit SA (GNFTF)

[Wildbilly]

Genfit: Why Intercept's NASH Phase 3 Design Is Good News For Genfit - Genfit (OTCMKTS:GNFTF)

Summary

Intercept just announced the design of its Phase 3 NASH trial.
FDA-approved "NASH resolution" primary endpoint supports Genfit's Phase 2b design.
With uncertainties from Intercept's Phase 3 endpoints and a 72 weeks minimum trial duration, Genfit's perspectives remain strong and could cover a much larger NASH patient population.
Up 50% since March 27 unjustified sell-off upon the announcement of GTF505 Phase 2b results, Genfit's stock still has significant upside and could reach $100 by year's end.
(Editor's Note: Investors should be mindful of the risks of transacting in securities with limited liquidity, such as GNFTF. Genfit's listing in Paris, GNFT.PA, offers stronger liquidity.)

Currently leading the race to develop one of the first treatments against nonalcoholic steatohepatitis or NASH - a disease affecting at least 2 to 5% of people in the U.S. - Intercept (NASDAQ:ICPT) just announced the design of its Phase 3 trial of obeticholic acid. While this announcement was expected to happen sometime in H1-2015 according to the company's own projections, the design of the trial itself was the real interesting fact here.

At the moment, only two companies have compounds readying for large pivotal Phase 3 trials in NASH with confirmed histological efficacy reported from Phase 2 trials, and those are Genfit (OTCPK:GNFTF) and Intercept. Genfit reported Phase 2b topline results in March 2015 for its lead drug, GFT505, while Intercept published in November 2014 the complete results of its Phase 2b FLINT trial in which it tested obeticholic acid, or OCA, in NASH patients.

As reported in my previous article on the subject, one of the major speculative elements of this design was the approval of Phase 3 endpoints by the FDA - since Intercept and Genfit's primary endpoints were different in phase 2, one could speculate about which endpoint would be favored by the FDA.

On the one hand, "NASH resolution without worsening of fibrosis" was Genfit's Phase 2 primary endpoint. On the other hand, Intercept was promoting its own Phase 2 endpoint of "no worsening in fibrosis and a decrease in NAFLD Activity Score (NAS) of at least 2 points," which basically meant that patients only needed to improve on their current disease stage rather than being effectively cured. In the end, it seems that Genfit's GOLDEN-505 trial endpoint will be the benchmark for future late-phase NASH trials.

When compared head to head, Phase 2 trials from Intercept and Genfit provided the following data on "NASH resolution endpoint":

- Intercept did not reach statistically significant results in this (secondary) endpoint in its FLINT trial;
- When excluding certain patients in post-hoc analysis, Intercept claims a 19% efficacy rate for OCA vs. 8% for placebo (p=0.0278) - see Figure 1 below;

- Genfit demonstrated significant improvement in NAS =4 patients (22.4% vs. 12.7%, p=0.046, RR=1.9);
- When considering only "balanced" centers (which had included patients in each of the 3 study arms), the efficacy rate is much higher (29% vs. 5% for placebo, p=0.01) - see Figure 2 below;


Additionally to the "NASH resolution" endpoint, Intercept also included a co-primary endpoint of "improvement of at least one stage of liver fibrosis with no worsening NASH." This is coherent with Intercept's drug being designated as a Breakthrough Therapy in NASH patients with liver fibrosis (and not all of NASH patients), and this is further confirmation that OCA's market potential will probably be limited to very ill patients with diagnosed liver fibrosis.

Why is that a logical evolution?

In Phase 2, OCA had significant side effects (including severe pruritus or itchy skin in 23% of patients) and induced LDL-C or "bad" cholesterol increase in many patients, which is very bad news since cardiovascular disease is one of the leading causes of death in NASH patients. On its own, OCA appears to be an effective treatment of NASH, but since risks might outweigh benefits in less ill patients, it seems logical that the FDA would require that OCA prescriptions be limited to patients with a very high risk of developing cirrhosis (and not given as a chronic treatment in moderately ill patients). Besides, the effects on LDL-C will assuredly be closely monitored during phase 3.

On the other hand, GFT505 is safe and has shown clear signs of efficacy on fibrosis-related biomarkers - see Figure 3 below. A Phase 3 trial expected to be longer than 52 weeks (Phase 2 duration) will be needed to confirm the good efficacy results on NAS =4 patients and demonstrate significant effects on reversal of liver fibrosis - perhaps 72 weeks or more. However, contrary to OCA, Genfit could in the long term cover a broad patient population with a NAS score of 4 or more (representing about 85% of all NASH patients) since Phase 2b data showed no severe adverse events and a global cardioprotective effect (decrease in LDL-cholesterol, insulin resistance in diabetic patients, etc.).


What else can we interpret from Intercept's announcement?

1. The FDA has made it clear that NASH resolution was the favored endpoint on which OCA has to demonstrate efficacy, even though it failed to do so in the FLINT trial's original results.

2. The FDA is willing to approve OCA only if it can demonstrate a clear improvement in liver fibrosis - the absence of progression could not be enough.

3. There will be no "super-accelerated" approval for OCA that would mean a shorter than 72 weeks timeframe even though the Phase 2 trial was stopped early (before its 72-week planned course), the FDA does not seem confident enough that benefits (NASH resolution and fibrosis improvement) will outweigh the risks (LDL increase and severe pruritus) on a shorter-treatment duration.

Why is that good news for Genfit?

1. Genfit's Phase 2 efficacy on FDA favored endpoint is an indication that this should be easily demonstrated in Phase 3 in the right patient population (NAS =4);

2. Genfit's global cardioprotective effect could position GFT505 as a chronic treatment on a very large segment of the NASH market, while moderately-to-severely ill patients without an urgent need to treat liver fibrosis would remain out of OCA's scope;

3. Genfit's management currently expects a Phase 3 design approval during this summer, which means that GFT505 is only a few months behind OCA in terms of regulatory developments; besides, since Intercept's trial should only start in Q3-2015 and be no shorter than 72 weeks, Genfit's drug is now more than ever closely following OCA's lead.

Savvy investors seem to have understood this, as Genfit's stock closed up 8.4% on the Paris stock exchange, while Intercept's plunged more than 16% on five times average volume on the announcement of Intercept's Phase 3 trial design.

From a shareholder's point of view, since my first coverage of Genfit (right after Phase 2b results in March 2015), the stock is still up 50%. The thesis developed in my article was that Genfit's results had been vastly misunderstood by the market, and even fell victim to negative propaganda led by some U.S. analysts. I stand by this thesis and reiterate my $100 price target by year's end, on the basis that Genfit's data, to this date, have shown every sign of a clear blockbuster potential in the broad NASH market when compared to current most advanced competitors.

(See charts and graphs:) http://seekingalpha.com/article/3198676-genfit-why-intercepts-nash-phase-3-design-is-good-news-for-genfit?auth_param=vfef:1alp148:028c476fe7cd79274613489e1624e96e&uprof=44

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