THE NEW INTERCEPT STRATEGY FOR OCA AND THE IMPACT OF GENFIT- GFT505 MARKET

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1 THE NEW INTERCEPT STRATEGY FOR OCA AND THE IMPACT OF GENFIT- GFT505 MARKET (G DIVRY- March the 22th, 2015) The new strategy of Intercept for OCA seems to be revealed in their communication last Friday and conf call that followed. I leaned on the subject and will try to share my personal point of views As an introduction, I would like to clarify that I am a small investor on GENFIT and that, even if my comments seem more oriented because of that, I am aware that NASH is a serious disease and that all drugs that save lives must be studied seriously. I sincerely believe that there needs several drug against NASH and that currently, many promising molecules whose OCA, GFT505 and Aramchol are in the pipe. Intercept is the first company who published clinical data on his molecule which mean they are the more easy to analyse and criticize than the other companies. Be sure I'll analyze and maybe criticize also the data on the GFT505 as soon they 'll be published. We were sensibilized by the safety side of drugs because of a recent affair in France on the Mediator which showed the unbalanced decision taken to distribute a drug despite its lethal side effects. regarding that point I think that the safety of a new treatment is as important as efficiency. Intercept published on Friday new datas on the FLINT study on OCA Findings: The OCA seems to be a promising drug for the NASH but the data presented show that taken alone, it has several side effects: Those admitted by INTERCEPT: An increase in LDL (detailed in their press release Friday) Decrease in HDL (not a word on it in their press release Friday) Impact on triglycerides (not a word on it in their press release Friday) An effect on pruritus mentioned on Friday. Those ignored by INTERCEPT: Increased insulin resistance (which is definitively not a good news) The absence of quotation of HDL and triglycerides in the Friday presentation may be logical because the purpose of this paper was to show the interest of an association of OCA with statins, and the effect of statins is low on triglycerides and very low on HDL, its most visible action is on LDL.

2 On insulin resistance they evacuated the question during confcall by questioning statistical weaknesses of the study (which is a bit odd given the weakness of their statistical measures of association with statins). What is interesting in the data they presented about the subgroups is the evolution of LDL increase. Initially the overall study announced a statistical increase in LDL 9mg / dl for the population treaty OCA to a decrease of 8 mg / dl on the placebo population, now they say: On the ( ) 141 patients treated with OCA (it seemed to me that it was 110 real) 26 started simultaneously treatment with statins 50 had treatment with statins and continued it 65 did not take statins Already, I am not a statistician but I find that 54% of patients were taking statins during the study, which should be a statistical reliability problem on the effects of the OCA. Statins are already known as PPAR alpha actors and to interact in NASH evolution. Secondly, the previously known increase of 9 mg / dl of LDL was initially estimated important but we discover now that this study was flawed by statin use on more than half of the survey population For patients who were not taking statins, the LDL increase is actually 16mg / dl close to double of the initial data It means for a high cardiovascular risk patient (which is the case of many NASH patients because of their obesity) where the target is generally a rate decrease of 20 LDL 40% to prevent risk of coronary heart disease, we have a 10% increase of the target rate There is a clear therapeutic interest in starting OCA treatment together with a statin because the increase in LDL seems cancelled (which does not mean that the patient will fully benefit from the effect statins that lower the LDL general rate in a 20 to 40% range ) this is confirmed by the fact that patients already treated with statins saw their LDL levels increase by 8,7 mg / dl Therefore A new patient untreated taking OCA has an LDL increase of about 10% of the target rate for patients with medium coronarian risk (Target 0.16 g / dl). If patient take some statins it will lower his LDL (- 20 to - 40% depending on the molecules and the departure rate) so it will end up with an LDL lower than its initial rate but the study does not say how much he would be down compared of what he could have hoped for with the same statin but not OCA. For previously treated patients with statins therefore already having an LDL lowered because of the treatment and taking OCA there was an increase in LDL of approximately 5% of the target rate for patients with medium coronarian risk To summarize, the OCA raises LDL level and statins are playing their role to decrease relatively the LDL level.

3 That said the incidence on risk of high- risk patients (morbid obesity and diabetes type 2 is more elevated because published targets for LDL levels are 0,1 g / dl. And hence the observed rate increases will have an impact with a much higher percentage The increased cardiovascular risk with OCA is reduced by statins but still important for patients with high coronarian risk Regarding the decreased sensitivity to insulin, it is a very bad news (the HOMA- IR score is 60 for OCA and only 40 for placebo) because the insulin resistance causes increased production of insulin by the pancreas then exhaustion that leads directly to a type 2 diabetes.. and recent studies show clearly the interaction between type 2 diabetes and NASH.. Any increase in diabetes risk factor is bad news for the treatment of NASH.

4 What is the Strategy INTERCEPT to face those controversial news? Well, use some good news and redefine its strategy. The good news is the confirmation of the antifibrotic effect of OCA even if it is limited. Unfortunatly, the statistical power of the effect was reduced by the premature termination of biopsies following a request from the DSMB to limitate risk for the patients According to the study, 45% of patients treated in the OCA saw histological improvement of the liver versus 21% for placebo. Disappearance of NASH (OCA 18% vs. 5% placebo) but with a p = point drop the NAS score index (60% vs 30% placebo OCA) with p = Fibrosis stage reduction of at least one grade on the score (39% vs 21% placebo OCA) p = With the study of two sub groups on fibrosis Obese (39% vs 18% placebo OCA) p = Diabetics (43% vs 18% placebo OCA) p = Some patients had fibrosis increased (17% vs 29% placebo OCA), but the statistical reliability is almost borderline on that p = 0.047%). Following these results INTERCEPT discreetly changed its strategy, and this became clear during the confcall of Friday.. PHASE 3 WILL BE ON PATIENTS WITH ESTABLISHED FIBROSIS They do not specify the threshold fibrosis score to be admitted to the study but logically should be > F2 but exclude patients without fibrosis will drastically reduce the size of the target market. Why are they doing that? In fact they have no choice, the safety of the OCA is still a problem for a long term treatment, they know it, the FDA know it. But the safety of a drug always arises in terms of risk / profit. If they want the FDA accepts the start of the phase 3, they must lowering this ratio to a tolerable thresholds ratio RISK / BENEFIT... Step 1: Lower the Risk. it was the subject of the communication of Friday showing that the association with statins is possible to lower this risk But it is definitively not enough Step2: Increase the benefit side focusing on the target patients whose vital risk is on the balance, taking only cirrhotic patients with cirrhosis or F3 fibrosis who have to date no treatment solution. The benefit for them is very high. By varying these two factors which, to my opinion, were the focus of discussions with the FDA, they hope to achieve the ratio Risk / Profits needed to start Phase 3 study on NASH

5 What impact on GENFIT and its GFT505 the main competitors of Intercept on NASH Obviously all depend on the results which will be published in the next few days on the improvement of NASH, as well as the impact on fibrosis. Some US analysts believe that GFT505 will less efficient on fibrosis than OCA. I do not know on what elements those opinions are based, but it is not my opinion. In all the previous studies on animals, the anti fibrotic effect of the GFT505 was strong and clear. and previous studies on humans showed also a clear impact on inflammation markers. We will know it soon. Therefore - If the GFT 505 results on NASH are there but not on fibrosis.it would follow a clear market segmentation between stages very advanced fibrotic or NASH for OCA and all other stages treated by the GFT505 and its better safety profile. The two drugs will be complementary and will cover the full spectrum of patients - If the GFT505 results on NASH are there as well as a significant improvement in fibrosis, INTERCEPT is really in a bind, and the potential NASH market share for OCA will be drastically reduced. The FDA could eventually focus on a safer drug like the GFT505 and the OCA phase 3 for the NASH could be postponed waiting for more complete impacts studies on side effects related to lipid and insulin. They should mainly target PBC. It not easy at this time to have a balanced point of view because of the lack of clinical data on the GFT505. We read also from analysts that the INTERCEPT FLINT / GOLDEN GENFIT studies are different, with different endpoints and different selection criteria, which would be nonsense to compare In fact even if the study criteria for success are actually different and that difference is controversial, the observed histological and biological parameters are exactly the same. This whereby with the published data it will be easy to make comparisons Example On the NASH both studies use the NAS Score This score ranges from 0 to 8 and is the sum of 3 sub scores The steatosis score ranging from 0 to 3 Lobular inflammation score ranging from 0 to 3 The Balloning score that ranges from 0 to 2 - The FLINT study primary endpoints is a minimum reduction of 2 points of NAS score without worsening of fibrosis - The GOLDEN study has as one of its primary histological end points a suppression of NASH (NAS Score < 3) without worsening of fibrosis

6 They are both obliged to publish the NAS Score evolution on the three histologic parameters. It would take less than a day to compare the raw data and to make an opinion on the most efficient molecule. Ditto for fibrosis, both studies use the same scoring system that goes from F1 to F4 - INTERCEPT in his secondary endpoint is looking to get a lower fibrosis score ( at least to reduce one point fibrosis score ) - GENFIT in one of secondary endpoints is looking at evolution fibrosis score This should not be too difficult to compare also. So on the two main parameters that are NASH and fibrosis, they use the same measurement tools and the same scoring system. Only their success criteria are different., but with full datas, even a financial analyst can make a comparison. Saying that the studies are not comparable is a bit like trying to hide behind his finger. I still think there is some room for multiple treatments on the NASH and all the supporting companies of the promising molecules mentioned should be respected and encouraged in their development because they can save lifes. Regarding the respective capitalizations of the companies At this time, the stock exchange capitalization of INTERCEPT is close to Billions $. The GENFIT capitalization on stock exchange is Billion $ The INTERCEPT valuation has integrated the OCA valuation on PBC already in phase 3 but should suffer from a debated safety profile on NASH GENFIT - GFT 505 phase 2b results are not yet published but its safety profile was already confirmed two times by the DSMB. Another Phase 2a is planned to start soon on Crohn disease and they have 6 other molecules in development. The potential of GFT505 on lipids, diabete, is not yet evaluated in term of market but many studies are very positive on those potential developments. If the results are good for the GFT505 for NASH and fibrosis, it's reasonable to assume that the market capitalization of GENFIT should quickly raise to the capitalization of Intercept, allowing a very large potential gain on the value. I am not a professional financial analyst, so the opinions expressed are just my own personal opinions. Like the data, they too, are subject to mistakes.