On November 16, 2020 GENFIT (Nasdaq and Euronext: GNFT) a late-stage biopharmaceutical company dedicated to improving the lives of patients with metabolic and chronic liver diseases, reported its cash position as of September 30, 2020 and revenues for the first nine months of 20201, and proposes to 2022 OCEANEs holders a partial buyback and an amendment of the existing terms (Press release, Genfit, NOV 16, 2020, View Source [SID1234571071]).
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Cash Position
As of September 30, 2020, the Company’s cash and cash equivalents amounted to €199.3 million compared with €303.0 million one year earlier.
As of June 30, 2020, cash and cash equivalents totaled €225.7 million.
Revenues2
Revenues for the first nine months of 2020 amounted to €350 thousand compared to €31 million for the same period in 2019.
Revenues for the 3rd quarter resulted mainly from services provided and revenues under the licensing and collaboration agreements signed with Labcorp and Terns Pharmaceuticals.
Recap
On September 30, 2020, GENFIT announced its plan to reduce its cash burn by more than 50% by 2022 compared to the cash burn prior to the RESOLVE-IT Phase 3 data.
GENFIT confirms its objective to reduce the current cash burn rate from €110 million annually before our Phase 3 data, to approximately €45 million annually, beginning in 2022. Due to the residual expenses related to the termination of RESOLVE-IT and the workforce restructuring plan, 2021 will be a transition year from a cash burn standpoint.
This plan incorporates the following key components:
• The overall clinical development program for elafibranor in NASH and all activities associated with the commercial launch of elafibranor in NASH have been terminated given the low probability of success compared to required expenses. The termination includes the NASH combination therapy trials, the pediatric trials, and other trials such as the evaluation of the impact of elafibranor on liver fat composition;
• A comprehensive cost-saving plan has been implemented, including the redirection of R&D activities and the termination of secondary programs such as the RORgT program;
• A workforce restructuring plan is underway to reduce the overall workforce by 40%, encompassing both the U.S and France in order to align the company size to the new scope of activity. The Company expects the plan to be completed by the end of the year.
Partial buyback and amendment of the terms of the 2022 OCEANEs
Pascal Prigent, CEO of GENFIT, commented: "The partial buyback and amendment of the terms of our convertible bonds, the terms of which are described below, aim to reduce by more than 50% the nominal amount of GENFIT’s financial debt, and to defer the maturity date of the remainder until 2025. We can allocate a maximum of €50 million to this transaction which will help the company maximize its chances of success in the interest of all stakeholders involved: the Company, its shareholders and bondholders. I am confident that through a constructive discussion with our bondholders we will find an acceptable compromise which will put the Company in a good position following the results of our Phase 3 PBC trial".
Main terms of the October 2022 OCEANEs
In October 2017, GENFIT (the "Company") issued 6,081,081 bonds convertible into new shares and/or exchangeable for existing shares due on October 16, 2020 for a nominal amount of €179,999,997.60 ("2022 OCEANEs") by way of a private placement to institutional investors.
The 2022 OCEANEs were issued at a nominal unit value of €29.60 and bear interest at an annual nominal rate of 3.50%, payable semi-annually in arrears on April 16 and October 16 of each year.
The 2022 OCEANEs entitle their holders to receive new and/or existing GENFIT shares at an initial conversion/exchange ratio of one share per 2022 OCEANE.
The 2022 OCEANEs trade on Euronext Access (ISIN: FR0013286903).
Company objectives
Despite the Company’s significant cost savings initiatives, the expected cash position on the maturity date of the 2022 OCEANEs will not allow the Company to repay the convertible bonds at par. This represents a significant hurdle to the Company’s development and the pursuit of its new strategy, with adverse consequences in several areas: access to funding, signing of commercial agreements or strategic partnerships.
Therefore, this situation represents a major constraint for the Company and all the stakeholders: the 2022 OCEANE holders, shareholders, financial and commercial partners.
The Company’s significant efforts to preserve its cash must therefore be accompanied by an amendment of the terms and conditions of the 2022 OCEANEs.
Natixis and Kepler Cheuvreux (the "Counsels") have been appointed by the Company to assist in this partial buyback and the amendment of the terms of the 2022 OCEANEs.
The Company and its Counsels have prepared a proposal encompassing a partial repurchase and an amendment of the terms of the 2022 OCEANEs, with the objective of:
preserving as much as possible the Company’s ability to finance its operations;
reducing the nominal amount of the financial debt to be redeemed;
deferring the maturity date of its convertible bonds in line with the next milestones in the Company’s two main programs: the ELATIVE Phase 3 clinical trial evaluating elafibranor in PBC and the NIS4 technology for (NASH) diagnosis; and
maximizing the potential for value-creation for shareholders and the 2022 OCEANE holders.
Proposal to the 2022 OCEANEs holders
In order to reach its objectives, the Company is considering proceeding in two interdependent phases:
1) Partial buyback of the 2022 OCEANEs
The Company is looking to reduce by more than 50% the nominal amount of the 2022 OCEANEs by repurchasing bonds that will then be cancelled. Considering the current cash level and the expected cash consumption over the coming years, the Company has allocated a maximum of €50 million to this objective. This envelope was determined to allow the continued operation of the Company’s business until the ELATIVE Phase 3 clinical trial evaluating elafibranor in PBC can be monetized.
All the repurchased 2022 OCEANEs will be bought back at the same price.
Should the buyback requests from the 2022 OCEANEs holders exceed the €50 million maximum repurchase amount contemplated by the Company, buyback requests will be reduced proportionally to ensure equal treatment among all the holders.
2) Amendment of the remaining portion (post partial buyback) of the terms of the 2022 OCEANEs
In order to pursue its strategy and maximize value creation for its shareholders and the 2022 OCEANEs holders, the Company proposes to amend the 2022 OCEANEs terms as described below:
a 3-year deferral of the maturity date (until October 16, 2025) which would reduce the financial pressure on the Company and give it the flexibility to decide on the optimal strategy to monetize results of the Phase 3 clinical trial ELATIVE evaluating elafibranor in PBC: direct commercial development or through partnerships, strategic alliances, etc.;
a deferral of the start of the early redemption period3 provided for in the 2022 OCEANEs terms and conditions (until November 3, 2023); and
an increase of the conversion ratio of the 2022 OCEANEs to be further determined, leading to an increased likelihood of conversion of the remaining portion of the 2022 OCEANEs, ultimately reinforcing the Company’s equity.
Implementation4
2022 OCEANE holders interested in the proposed partial buyback are invited to contact the Company or its Counsels. Retail holders should contact the 2022 OCEANE Bondholder Representative (Représentant de la Masse) at [email protected]
The Company will announce the definitive terms of the partial buyback as well as the amendments to the 2022 OCEANEs terms and conditions (in particular, the repurchase price offered for the 2022 OCEANEs and the contemplated conversion ratio) in a subsequent communication.
The Company and the 2022 OCEANE holders will then be able to enter into agreements relating to the 2022 OCEANE buyback, which will remain contingent on and occur after the following events:
approval by the Extraordinary General Meeting of the Company’s shareholders of the new conversion ratio; and
approval by the 2022 OCEANE holders of the aforementioned amendments.
As a final step, the Company will convene a general meeting of the shareholders and a general meeting of the 2022 OCEANE holders, which are expected to be held in the first quarter of 2021.