Genfit SA (GNFT) Risk Factors

Elafibranor, our most advanced drug candidate, is currently being evaluated in a Phase 3 ELATIVE clinical trial in PBC. Only two treatments are currently approved and marketed in this indication and do not meet the medical needs of all patients. A limited number of treatments are therefore approved for the management of this disease and we have little experience with drug development in this disease area. The development and approval of drug candidates to treat PBC may therefore present an even higher level of risk than in other indications. As a result, it is possible that our ELATIVE clinical trial or other additional clinical trials in PBC in particular, and our other ongoing or future clinical trials in general, fail to meet their primary endpoints, as was the case with our Phase 3 RESOLVE-IT trial evaluating elafibranor in NASH in 2020, or are delayed, additional development is necessary or, despite a favorable outcome in clinical trials, the regulatory authorities consider that the clinical results of these trials are insufficient to grant or maintain a marketing authorization. These different risks are developed below. Our other program, NTZ in fibrosis, is at an earlier stage of development. NTZ it is currently being evaluated in an independent investigator-led Phase 2 trial for the treatment of patients with NASH with severe fibrosis. A clinical failure of elafibranor in PBC, a delay or an increase in the cost of its clinical development or the failure to receive marketing authorization would therefore have a negative impact, even more so since it would impact our primary program and the most advanced in our portfolio of drug candidates. As a result, we could be forced to discontinue our development in PBC, one of our main programs, which could significantly affect the future of our Group.

In January 2019, we entered into a license agreement with Labcorp to allow them to develop and deploy a test powered by NIS4 technology in the clinical research space. We believe that leveraging the capabilities of a large diagnostic company such as Labcorp, through its Covance laboratory network, will allow for early adoption of NIS4 technology and result in third party publications. In September 2020, we entered into a five-year exclusive licensing agreement for NIS4 technology with Labcorp. As part of the agreement, Labcorp will develop and commercialize a blood-based molecular diagnostic test powered by NIS4 technology throughout the U.S. and Canada enabling widespread access to healthcare providers. We expect this agreement with Labcorp to provide broad clinical availability of a LDT powered by NIS4 technology to specialty and primary care physicians across the U.S. and Canada. Labcorp will leverage its deep experience in commercializing innovative diagnostics to educate providers on NASH and the importance of non-invasive testing. We believe this recent agreement will enable broader test availability to support evidence generation, demonstration of clinical utility, and favorable market access of the test powered by NIS4. We intend to benefit from these advantages to support the next step of the development, clearance, and commercialization of an IVD powered by NIS4 to enable even broader availability of the clinical diagnostic outside of the central lab setting. Development of an IVD will nevertheless require us to keep gathering clinical data within the framework of trials or observational studies in which NIS4 is currently being evaluated or within the framework of potential additional clinical trials or observational studies to come. In these trials or observational studies, we will continue to use human samples. Even if we have preferred access to the samples collected during the clinical development of elafibranor in NASH, we may be unable to access a sufficient quantity of samples or samples of a sufficient quality or usability, in which case the continuation of the development of NIS4 could be slowed down or even interrupted. In order to have access to samples, we may be required to enter into partnership agreement with hospitals or key opinion leaders, and we may not be able to enter into these agreements under satisfactory conditions or within the desired timeframes, if at all. The strength of NIS4 technology initially identified on a relatively limited number of samples could turn out to not be sufficient during potential future validation studies on larger target populations, and notably not display sufficient levels of accuracy, sensitivity or specificity in order to allow for the development of a competitive test for clinical care that would be adopted by the medical community. Despite the care applied to the development of NIS4 technology, we may not exclude the appearance after the development phase of inherent defects to the product or technology that were undetectable or inconspicuous defects based on the existing technical and scientific knowledge during the development. A failure may occur at any time during one of these clinical developments. The results of earlier clinical trials or studies does not allow predicting future results and NIS4 technology may not obtain favorable results in the clinical studies that we will keep conducting. In particular, these may not allow to reinforce the state of knowledge pertaining to it and to demonstrate its clinical utility nor the medico-economic benefit. It is possible, in particular, that an LDT or IVD powered by NIS4, at the time of its launch on the market for clinical care, will not replace the current tests and medical examinations. In that case, the place of a test powered by NIS4, initially or as a complement or substitute of certain examinations would have to be assessed through additional clinical studies that would allow evaluating its medico-economic benefit often required to obtain reimbursement. The results of these studies may not allow to define for NIS4 a place that answers the needs of clinical practitioners or to demonstrate its favorable economic outcome. With such results, a test powered by NIS4 may not obtain reimbursement, especially in European countries, and see its sales stagnate at a low level, or even not be able to be sold. Moreover, the data gathered during these trials and studies are subject to different interpretations, and regulatory authorities may not interpret our data as favorably as us or our collaborators, which may delay, limit or prevent the regulatory authorization for the use of an IVD powered by NIS4 as a diagnostic tool for clinical care. Besides, the design of these trials may determine if their results can support the application for market approval and procedural defects of a trial may not be visible before the trial reaches an advanced stage. We or our collaborators may not be able to design and conduct a clinical trial sufficient to support a regulatory market approval of an IVD powered by NIS4 for clinical care, which may have a significant unfavorable impact on our perspectives and activities. Changes in regulatory requirements or guidelines issued by the regulatory authorities, or unforeseen events occurring during these trials may force us or our collaborators to alter the protocol or impose new requirements within the framework of these trials or studies, which may result in higher costs and delays in the development schedule of NIS4 technology. If delays occurred in the completion of these clinical trials, or if they were terminated, or if additional clinical trials or studies were required besides the planned ones, this would impact the commercial perspectives of an IVD powered by NIS4 and our ability to generate direct or indirect industrial revenue from this product would be delayed.

In 2019, the FDA granted breakthrough therapy designation for elafibranor for the treatment of PBC. We may also seek breakthrough therapy designation for elafibranor in a different indication or in combination or for any other drug candidate that we may develop in the future. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. For drugs that are designated as breakthrough therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe a drug candidate meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug candidate may not result in a faster development process, review or approval compared to conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more drug candidate qualifies as a breakthrough therapy, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

We intend to develop an IVD powered by NIS4 to identify patients with NASH and fibrosis who may be eligible for therapeutic interventions in a field where no NASH-specific non-invasive test has been approved nor commercialized for clinical care to date and for which clinical experience is currently limited. Our development approach relies therefore on new methodologies. It is thus possible that, in this context, our clinical trials do not meet a favorable outcome or that, despite a favorable outcome, regulatory authorities evaluate that the results of our clinical trials or those of our collaborators are insufficient to grant market approval for an IVD test using the NIS4 technology for clinical care. Despite the care applied to the development of NIS4, we may not exclude the appearance after the development phase of inherent defects to the product that were undetectable or inconspicuous defects based on the existing technical and scientific knowledge during the development. In order to be allowed to directly market and sell an IVD powered by NIS4 in the European Union and the United States, the product must achieve CE marking from a qualified Notified Body in Europe and FDA approval/clearance in the United States. Other relevant regulatory requirements must be met to market in other countries. In the United States, IVD tests are regulated as medical devices. Therefore, to be commercially distributed for clinical care, an IVD diagnostic product must demonstrate, depending on its regulatory classification, either its safety and efficiency through a pre-market approval, or its substantial equivalence to a previously FDA-approved medical device through clearance of a 501(k) premarket notification. This regulatory classification may not be obtained. A clinical trial is almost always required to support a pre-market approval or PMA application and is sometimes required for 510(k) clearance. All clinical studies of medical devices must be conducted in compliance with any applicable FDA and Institutional Review Board requirements. Alternatively, the product may be marketed as a Laboratory Developed Test or LDT, which does not require FDA approval, but requires the laboratory conducting the test to have been certified under the Clinical Laboratory Improvement Amendments of 1988 Act or CLIA and certain state laboratory licenses. Both testing services by Labcorp and Covance are currently conducted within the framework of CLIA, which establishes quality standards that must be followed in laboratory testing in order to ensure accuracy, reliability and speed of patient test results wherever the test is conducted. This law has instated an accreditation program for clinical laboratories, which Labcorp and Covance have received. We currently do not have any IVD approved or cleared test that has been approved for marketing through such a regulatory process and we cannot guarantee that we or potential or future collaborators will ever own marketable IVD tests. We have not submitted any marketing applications for any IVD test, and, in particular, we have not submitted any marketing application for NIS4. As with approval of our drug candidates, the process for obtaining marketing authorization of diagnostic candidates for clinical care is lengthy, uncertain and expensive. In the United States, IVD tests are regulated as medical devices. The Federal Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labelling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Concurrently with evaluating the FDA approval process for our IVD test, we are collecting data to obtain CE Mark and the subsequent market authorization in the key European markets. Like the U.S. approval process, the CE marking process in Europe may be lengthy and expensive, and the exact date of market approval issuance, if received at all, remains hard to predict. Each regulatory authority may indeed refuse to issue approval, impose its own conditions to such issuance, or require additional data prior to issuance, even when such approval would have been already granted by regulatory authorities in other jurisdictions. Regulatory authorities may also modify their approval policies, particularly by adding new or additional conditions to grant approval. The European Commission, for example, published in 2012 two European regulation proposals in order to replace the currently applicable directives on medical devices. The European Commission indicated at the time that the European regulations may be adopted in 2014 and come into force between 2017 and 2019. Since then, the European Parliament has adopted legislative resolutions on the proposed regulations at first reading on April 2, 2014. The new regulation was unanimously approved by the European Council during its June 2015 session. These modifications mostly require the implementation of a new classification of in-vitro diagnostic medical devices (IVDMD) and the strengthening of requirements regarding the level of detail to be presented about relevance and clinical validation. After its adoption by the European Council on March 7, 2017 and the European Parliament on April 5, 2017, the new (EU) 2017/746 regulation on in-vitro diagnostic medical devices (IVDMD) came into force on May 25, 2017. The transition period will last 5 years, until 2022, during which medical devices manufacturers will be required to update their technical documentation process. We or our potential collaborators may therefore be subject to delays in obtaining the approval required to market NIS4 for clinical care, or even not be successful in receiving approval. Such delay or failure may have an unfavorable impact on our ability to market NIS4 and our ability to generate direct or indirect revenue from this activity. Even after regulatory approval has been granted or declarations of commercialization have been filed with regulatory authorities, IVD tests remains subject to pharmacovigilance monitoring of incidents and risks of incidents related to their use. Even though these are relatively rare with non-invasive products like IVD tests, such incidents may occur and lead regulatory authorities to suspend or even revoke the market authorization of such products. Regulatory authorities may also conclude that procedures put it place by us or our collaborators are insufficient in order to identify and handle incidents, and could suspend commercialization of the products until these procedures are considered sufficient.

Clinical failure can occur at any stage of our clinical development or those of our current partner or a future partner. Clinical trials may produce negative or inconclusive results, and we or our collaborators may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we or our collaborators do, which may delay, limit or prevent regulatory approval or marketing authorization. Success in preclinical studies and early clinical trials does not ensure that subsequent clinical trials will generate the same or similar results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. A number of companies in the pharmaceutical industry, including those with greater resources and experience than us or our current and potential future collaborators, have suffered significant setbacks in Phase 3 clinical trials and at other stages of clinical development in particular in PBC even after seeing promising results in earlier clinical trials. For example, in May 2020, we published the top line results of the interim analysis of our Phase 3 RESOLVE-IT trial of elafibranor in NASH.  Elafibranor did not demonstrate a statistically significant effect on the primary surrogate efficacy endpoint of NASH resolution without worsening of fibrosis nor on the key secondary endpoints. These results led us to stop development of elafibranor in NASH in 2020 due to lack of efficacy but not due to safety reasons. In addition, the design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well-advanced. We or our collaborators may be unable to design and execute a clinical trial to support regulatory approval. Further, clinical trials of potential products often reveal that it is not practical or feasible to continue development efforts. If elafibranor or our other drug candidates are found to be unsafe or lack efficacy for any indication, we or our collaborators will not be able to obtain regulatory approval for them, and our prospects and business may be materially and adversely affected. For example, if the results of our Phase 3 ELATIVE trial of elafibranor in PBC does not achieve the primary efficacy endpoints or demonstrate expected safety, the prospects for approval of elafibranor in PBC would be materially and adversely affected. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes or differences in trial protocols, patient distribution by clinical investigator site, standards of care across sites, differences in composition of the patient populations, adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. We do not know whether any Phase 2, Phase 3 or other clinical trials we or any of our collaborators may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates. If we or our collaborators are unable to bring any of our current or future product candidates to market, or to acquire any marketed, previously approved products, our ability to create long-term shareholder value will be limited.

We currently have underway two advanced phase clinical trials, in particular our Phase 3 ELATIVE trial of elafibranor in PBC for which the first patient was enrolled in September 2020. Delays in the commencement, enrollment and completion of our clinical trials or those of our partner Terns Pharmaceuticals or any future collaborator could increase our product development costs or limit our ability to obtain regulatory approval of our drug candidates. In the past, we have experienced some delays in enrollment in our clinical trials, including in our RESOLVE-IT clinical trial. The results from these trials may not be available when we expect or we or our collaborators may be required to conduct additional clinical trials or preclinical studies not currently planned to receive approval for our product candidates, including elafibranor. In addition, our clinical programs and those of our partner are subject to a number of variables and contingencies, such as the results of other trials, patient enrollments or regulatory interactions that may result in a change in timing. As such, we do not know whether any future trials or studies in elafibranor or our other product candidates will begin on time or will be completed on schedule, if at all. The commencement, enrollment and completion of clinical trials can be delayed or suspended for a variety of reasons, including: - inability to demonstrate sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial;- inability to validate test methods to support quality testing of the drug substance and drug product;- inability to determine dosing and clinical trial design;- inability to obtain sufficient funds required for a clinical trial or lack of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions;- our inability to enter into collaborations relating to the development and commercialization of our product candidates;- inability to reach agreements on acceptable terms with prospective contract research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;- clinical holds, other regulatory objections to commencing or continuing a clinical trial or the inability to obtain regulatory approval to commence a clinical trial in countries that require such approvals;- discussions with the FDA, EMA or other non-U.S. regulators regarding the scope or design of our clinical trials, which may occur at various times, including subsequent to the initiation of the clinical trial;- governmental or regulatory delays and changes in regulatory requirements, policy and guidelines, including mandated changes in the scope or design of clinical trials or requests for supplemental information with respect to clinical trial results;- varying interpretations of our data, and regulatory commitments and requirements by the FDA, EMA and similar regulatory agencies;- inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indications targeted by our product candidates;- the delay in receiving results from or the failure to achieve the necessary results in other clinical trials;- inability to obtain approval from institutional review boards, or IRBs, to conduct a clinical trial at their respective sites;- lack of effectiveness of product candidates during clinical trials;- suspension or termination by a data and safety monitoring board, or DSMB, that is overseeing the clinical trial;- changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;- failure to conduct clinical trials in accordance with regulatory requirements;- severe or unexpected drug-related adverse effects experienced by patients or any determination that a clinical trial presents unacceptable health risks;- a breach of the terms of any agreement with, or termination for any other reason by, current or future collaborators that have responsibility for the clinical development of any of our product candidates, or investigators leading clinical trials on our product candidates;- inability to timely manufacture or deliver sufficient quantities of the product candidate required for preclinical studies or clinical trials;- difficulty identifying, recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including meeting the enrollment criteria for our trial, the rarity of the disease or condition, the rarity of the characteristics of the population being studied, the nature of the protocol, the risks of procedures that may be required as part of the trial, such as a liver biopsy, the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial, and competition from other clinical trial programs for the same indications as our product candidates;- global health pandemics such as COVID-19 or natural disasters; and - inability to retain enrolled patients after a clinical trial is underway. For example, our RESOLVE-IT trial was a large and complex Phase 3 clinical trial in a disease without any approved therapies and the diagnosis of which generally involves invasive procedures such as liver biopsies. These specificities led us to face significant competition for patient enrollment, and to delay the publication date of our top line interim analysis. As we engage in other large and complicated trials and trials in advanced disease populations, including our ongoing Phase 3 ELATIVE  trial evaluating elafibranor in PBC, we may experience a number of complications that may negatively affect our plans or our development programs. The ELATIVE  trial evaluating elafibranor in PBC in particular is made complex by the fact that it is an orphan disease with a small number of patients and the fact that one of our competitor's product is the only one to have recently received market approval in this indication, and another phase 3 trial is enrolling patients at the same time as ours which may compromise our ability to retain or recruit patients or complete the trial on time . Potential discussions with the FDA, the EMA or other regulatory authorities outside the United States or Europe regarding the scope or design of our clinical trials may also happen at any time. More broadly, changes in the treatment of PBC, such as the approval of a drug therapy for the treatment of PBC by one of our competitors, could result in difficulties retaining or enrolling patients in our clinical trials and those of our current or collaborators. Any difficulty retaining patients may in the future delay or produce negative or inconclusive results from our clinical trials, and we or our collaborators may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. Any delay or compromises with respect to our clinical trials may have a material adverse effect on our business or decrease our competitive position relative to other biotechnology or pharmaceutical companies.

If we initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or technologies, the defendant could counterclaim that the patent covering one of our product candidates or technologies is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and unenforceability of an asserted patent or patents are common. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness, written description or non-enablement. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review and/or inter partes review and equivalent proceedings in foreign jurisdictions, such as, opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. Similarly, we may initiate proceedings before the Patent Trial and Appeal Board, or PTAB, of the USPTO, such as post grant review, or PGR, derivation, or inter partes review, against patents granted to third parties. For example, NTZ, which is being evaluated as an anti-fibrotic in an investigator-initiated Phase 2 clinical trial, has been commercialized by Romark Laboratories (Romark) for use as an anti-parasitic drug. We have a number of granted U.S. patents covering the use of NTZ as an anti-fibrotic in certain organs, including in the liver for the treatment of liver fibrosis consecutive to NASH. Romark has obtained a reissued U.S. patent which claims the use of NTZ in liver fibrosis. This delays us from obtaining issued patents with similar claims in the U.S. and prompts additional proceedings in the USPTO against such patent or against other third party applications or patents or consider the need or benefit of entering into a license agreement with such third party or parties in order to exploit such patent alone or together with Romark or such other third party or parties. In the event that we do not prevail or the settlement terms with the adverse party are unfavorable, or we are unable to reach an agreement on terms sufficiently favorable to us, our ability to market our product candidates may be affected or delayed. The outcome following legal assertions of invalidity and unenforceability in the PTAB or the federal courts is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, in particular, in the United States, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ADSs or ordinary shares. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims in the federal courts, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

The patent positions of biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions. Typically, the development, manufacture, sale and distribution of biopharmaceutical compositions is complicated by third-party intellectual property rights to a greater extent than for the development, manufacture, sale and distribution of small molecule drugs. The interpretation and breadth of claims allowed in some patents covering biopharmaceutical compositions may be uncertain and difficult to determine, and are often affected materially by the facts and circumstances that pertain to the patented compositions and the related patent claims. The standards of the USPTO are evolving and could change in the future. Consequently, we cannot predict the issuance and scope of patents with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to derivation or interference proceedings, and U.S. patents may be subject to reexamination proceedings, post-grant review and/or inter partes review at the USPTO. Foreign patents may be subject also to opposition or comparable proceedings in the corresponding foreign patent office, which could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, reexamination, post-grant review, inter partes review and opposition proceedings may be costly. Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or processes. In addition, changes in or different interpretations of patent laws in the United States and foreign countries may permit others to use our discoveries or to develop and commercialize our technology and products without providing any compensation to us, or may limit the number of patents or claims we can obtain. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws and those countries may lack adequate rules and procedures for defending our intellectual property rights. If we fail to obtain and maintain patent protection and trade secret protection for our product candidates, we could lose our competitive advantage and the competition we face would increase, reducing any potential revenues and adversely affecting our ability to attain or maintain profitability.

Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates and use our technologies without infringing the intellectual property and other proprietary rights of third parties. If any third-party patents or patent applications are found to cover our product candidates or their methods of use, we may not be free to manufacture or market our product candidates as planned without obtaining a license, which may not be available on commercially reasonable terms, or at all. There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our product candidates, including interference proceedings before the USPTO. Third parties may assert infringement claims against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion. If we are found to infringe a third party's intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, we could, in certain circumstances, be found liable for monetary damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims may also be made that we have misappropriated the confidential information or trade secrets of third parties, which could have a similar negative impact on our business.

From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress, the USPTO or similar foreign authorities may change the standards of patentability and any such changes could have a negative impact on our business. In addition, the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in 2011, includes a number of significant changes to U.S. patent law. These changes include a transition from a "first-to-invent" system to a "first-to-file" system, changes to the way issued patents are challenged, and changes to the way patent applications are disputed during the examination process. In certain areas, these changes may favor larger and more established companies that have greater resources to devote to patent application filing and prosecution. The USPTO has developed new regulations and procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law associated with the America Invents Act, and, in particular, the first-to-file provisions, became effective on March 16, 2013. Substantive changes to patent law associated with the America Invents Act, or any subsequent U.S. legislation regarding patents, may affect our ability to obtain patents, and if obtained, to enforce or defend them. Furthermore, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances for diagnostic method claims and gene patents. In view of these and other U.S. federal appellate cases, we cannot guarantee that our efforts to seek patent protection for our tools and biomarkers will be successful.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms for certain patents in the United States and, if available, in other countries where we are prosecuting patents and seeking approval of various products. Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments; similarly, selected patents outside the U.S., may be eligible for supplementary protection certificate, or SPC, under corresponding legislation in Europe and several other countries. Depending upon the circumstances, the Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

In addition to patent protection, because we operate in the highly technical field of development of therapies, we rely in part on trade secret protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We have entered into confidentiality and intellectual property assignment agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party's relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.

Filing, prosecuting and defending patents on our product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States and Europe could be less extensive than those in the United States and Europe, assuming that patent rights are obtained in the United States. Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States and Europe. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the federal and state laws in the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly in developing countries, do not favor the enforcement of patents and other intellectual property rights, especially those relating to biopharmaceuticals or biotechnologies. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties for certain products. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. We have written agreements with collaborators that provide for the ownership of intellectual property arising from our collaborations. These agreements provide that we must negotiate certain commercial rights with collaborators with respect to joint inventions or inventions made by our collaborators that arise from the results of the collaboration. In some instances, there may not be adequate written provisions to clearly address the resolution of intellectual property rights that may arise from collaboration. If we cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from our use of a third-party collaborator's materials where required, or if disputes otherwise arise with respect to the intellectual property developed with the use of a collaborator's samples, we may be limited in our ability to capitalize on the market potential of these inventions. In addition, we may face claims by third parties that our agreements with employees, contractors, or consultants obligating them to assign intellectual property to us are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such inventions. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual property. Either outcome could have an adverse impact on our business.

There is significant litigation in the biopharmaceutical industry regarding patent and other intellectual property rights. We may be exposed to future litigation by third parties based on claims that our product candidates, technologies or activities infringe the intellectual property rights of others. If our development activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to such patents. A patentee could prevent us from using the patented drugs or compositions. We may need to resort to litigation to enforce a patent issued to us, to protect our trade secrets, or to determine the scope and validity of third-party proprietary rights. For example, in 2020 we received an anonymous whistleblower allegation that CymaBay Therapeutics, Inc. ("CymaBay") had improperly acquired and disclosed the protocol synopsis ("Protocol") for our Phase 3 ELATIVE™ clinical trial of elafibranor in PBC.  We subsequently filed a Complaint on January 15, 2021 against CymaBay in the U.S. District Court for the Northern District of California alleging that CymaBay, among other things, violated the U.S. federal Defend Trade Secrets Act and the California Uniform Trade Secrets Act when it misappropriated the Protocol.  On the same day that we filed the Complaint, we sought a temporary restraining order ("TRO") against CymaBay, and on March 12, 2021 the Court granted the TRO (which has since been converted into a preliminary injunction).  While the ultimate outcome of the litigation remains uncertain, the Court found, in relevant part, that we are likely to succeed on the merits of our trade secret claims. From time to time, we may hire scientific personnel or consultants formerly employed by other companies involved in one or more areas similar to the activities conducted by us. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, and no such claims against us are currently pending, we may be subject to claims that we or our employees, consultants or independent contractors have used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Either we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of prior affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. We may not be able to afford the costs of litigation. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a negative impact on our cash position. Any legal action against us or our collaborators could lead to: - payment of damages, potentially treble damages, if we are found to have willfully infringed a party's patent rights;- injunctive or other equitable relief that may effectively block our ability to further develop, commercialize, and sell products; or - us having to enter into license arrangements that may not be available on commercially acceptable terms, if at all. Any of these outcomes could hurt our cash position and financial condition and our ability to develop and commercialize our product candidates.

Healthcare providers and others in the healthcare and pharmaceutical sector will play a primary role in the clinical development and potential regulatory approval of our product candidates and their recommendation and prescription, if approved. Our arrangements with them and third party payors as well as our activities expose us to broadly applicable federal and state fraud and abuse and other healthcare laws, which may restrict these arrangements and relations through which we research and develop our products, and if approved, we or our current or future collaborators will market and distribute them. These laws may thus impact, among other things, our research, development, proposed sales, marketing and education programs of our product candidates that obtain marketing approval. Restrictions under applicable U.S. federal, state and non-U.S. healthcare laws and regulations include, but are not limited to, the following: - the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, including any kickback, bribe or rebate, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase or lease, order or recommendation of, any item, good, facility or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;- U.S. federal civil and criminal false claims laws, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws impose penalties, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government;- the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that impose criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or knowingly and willingly falsifying, concealing or covering up a material fact or making false statements relating to healthcare matters;- HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, which impose certain requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses and their respective business associates and covered subcontractors that perform functions or activities that involve HIPAA Protected Health Information on their behalf, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;- U.S. federal transparency requirements under the Physician Payments Sunshine Act, enacted as part of the ACA, that require applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children's Health Insurance Program, with specific exceptions, to track and annually report to the CMS payments and other transfers of value provided to physicians (defined to include doctors,optometrists, podiatrists and chiropractors) and teaching hospitals, and certain ownership and investment interests held by physicians or their immediate family members.  Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided during the previous year to physician assistants, nurse practitioner, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists and certified nurse-midwives;- analogous state or non-U.S. laws and regulations, such as state anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, marketing and/or transparency laws applicable to manufacturers that may be broader in scope than the federal requirements, laws that require biopharmaceutical companies to comply with the biopharmaceutical industry's voluntary compliance guidelines, laws requiring manufacturers to declare information related to payment and other gratification to physicians and other healthcare providers or to publicly divulge the expenses related to marketing products and communicate information on their price, and laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect as HIPAA, thus complicating compliance efforts;- the Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also requires companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts. The FCPA presents particular challenges for the pharmaceutical industry since, in many countries, hospitals are managed by the government, and their physicians and other employees are considered foreign public agents. As such, some payments to hospitals related to clinical trials and other work have been regarded as irregular payments to foreign agents and lead to enforcement action on the basis of the FCPA; and. - the equivalent anticorruption laws in foreign countries, such as the French law of December 9 2016 or the UK Bribery Act of 2010 that may also be invoked under similar circumstances related to corrupt practices. Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, and fraud laws may prove costly. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business.

We are currently conducting a clinical-stage program based on drug repositioning to develop an anti-fibrotic drug candidate, nitazoxanide, or NTZ, for which we may seek FDA approval through the Section 505(b)(2) regulatory pathway. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us under the FDCA, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA's prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. The Phase 2 investigator-initiated clinical trial of NTZ in NASH-induced fibrosis was allowed based on the existing FDA evaluations of safety in the currently-approved indication, which is a hallmark of the Section 505(b)(2) regulatory pathway. As we progress the clinical program, we plan to initiate such discussions with the FDA. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as we anticipated, we may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that our product candidates will receive the requisite approvals for commercialization. In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDAs for up to 30 months or longer depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if we or a future partner are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to accelerated product development or earlier approval. Moreover, even if our product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

Even if we or our collaborators receive regulatory approval for a product candidate, this approval may carry conditions that limit the market for the product or put the product at a competitive disadvantage relative to alternative therapies or diagnostic solutions. For instance, a regulatory approval may limit the indicated uses for which we or our collaborators can market a product or the patient population that may utilize the product, or may be required to carry a warning, such as a boxed warning, in its labelling and on its packaging. Products with boxed warnings are subject to more restrictive advertising regulations than products without such warnings. These restrictions could make it more difficult to market any product candidate effectively. Additionally, any of our product candidates for which we or our collaborators obtain marketing approval, as well as the manufacturing processes, post-approval studies and measures, labelling, advertising and promotional activities for such products, among other things, will be subject to continual requirements of and review by the EMA, FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Approved drugs that are manufactured or distributed in the United States pursuant to FDA approvals are subject to pervasive and continuing regulation by the EMA and the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, drug sampling and distribution, advertising and promotion and reporting of adverse experiences with the drug. After approval, most changes to the approved drug, such as adding new indications or other labelling claims and some manufacturing and supplier changes are subject to prior FDA review and approval. There also are continuing, annual program user fee requirements for marketed drugs, as well as new application fees for certain supplemental applications. Once approval is granted, the FDA may issue enforcement letters or withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the drug reaches the market. Corrective action could delay drug distribution and require significant time and financial expenditures. Later discovery of previously unknown problems with a drug, including adverse effects of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labelling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a risk evaluation and mitigation strategy, or REMS. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use. Elements to assure safe use can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can be costly to establish and can materially affect the potential market and profitability of the drug. Depending on the outcome, the FDA or EMA could revoke the previously granted approval. Other potential consequences include, among other things: - restrictions on the marketing or manufacturing of the drug, suspension of the approval, complete withdrawal of the drug from the market or product recalls;- fines, warning letters or holds on post-approval clinical trials;- refusal of the FDA to approve applications or supplements to approved applications, or suspension or revocation of drug approvals;- drug seizure or detention, or refusal to permit the import or export of drugs; or - injunctions or the imposition of civil or criminal penalties. The FDA strictly regulates marketing, labelling, advertising and promotion of drugs that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil, criminal and administrative penalties. However, physicians may, in their independent medical judgment, prescribe legally available products for off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments but the FDA does restrict manufacturer's communications on the subject of off-label use of their products. Similarly, if an IVD powered by NIS4 is authorized for marketing for clinical care in the United States, the test will be subject to quality system regulation, or QSR, labelling regulations, registration and listing, the Medical Device Reporting regulation which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur and the Reports of Corrections and Removals regulation which requires manufacturers to report recalls and field actions to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA. The FDA enforces these requirements by inspection and market surveillance. If the FDA finds a violation, it can institute a wide variety of enforcement actions, ranging from an untitled or public warning letter to more severe sanctions such as fines, injunctions and civil penalties; recall or seizure of products; operating restrictions and partial suspension or total shutdown of production; refusing requests for 510(k) clearance or PMA approval of new products; withdrawing 510(k) clearance or PMAs already granted; and criminal prosecution. Accordingly, assuming we or our current or future collaborators receive marketing approval for one or more of our product candidates, we and our collaborators will continue to expend time, money and effort in all areas of regulatory compliance.

Our ability to successfully commercialize any of our product candidates or that of our current or future collaborators, if approved, also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors, including government authorities, such as Medicare and Medicaid in the United States, private health insurers and health maintenance organizations. These third-party payors determine which medications they will cover and establish reimbursement levels. Assuming we or our current or future collaborators obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of our products. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs, such as by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices as a condition of coverage, are using restrictive formularies and preferred drug lists to leverage greater discounts in competitive classes, and are challenging the prices charged for medical products. In addition, in the United States, federal programs impose penalties on drug manufacturers in the form of mandatory additional rebates and/or discounts if commercial prices increase at a rate greater than the Consumer Price Index-Urban, and these rebates and/or discounts, which can be substantial, may impact our or our collaborators' ability to raise commercial prices. Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. Therefore,coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us or our collaborators to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. The continuing efforts of third-party payors of healthcare costs to contain or reduce costs of healthcare may negatively affect our or our collaborators commercialization prospects, including: - the ability to set a price we believe is fair for our or our collaborators' products, if approved;- the ability to obtain and maintain market acceptance by the medical community and patients;- the ability to generate revenues and achieve profitability; and - the availability of capital. Our or our collaborators' ability to obtain an acceptable reimbursement rate for our drugs from third-party payors will be determined in the coming years, in particular at the end of the development of elafibranor in PBC, which is our most advanced drug candidate. We cannot be sure that coverage and reimbursement will be available for any potential product candidate that we or our collaborators may commercialize and, if reimbursement is available, what the level of reimbursement will be. Since few drugs have been commercialized in PBC, we are currently working internally on market access and pricing, but cannot predict the conditions of elafibranor's future reimbursement. However, because negotiations with the payors are traditionally based on the results (intermediate, or otherwise) of Phase 3 clinical trials, we have only had preliminary discussions with the organizations concerned. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we or our collaborators obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval. In the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, ACA, is significantly impacting the provision of, and payment for, healthcare. With regard to pharmaceutical products specifically, the ACA, among other things, expanded and increased industry rebates for drugs covered under Medicaid programs and made changes to the coverage requirements under the Medicare prescription drug benefit. Some of the provisions of the ACA have yet to be implemented, and there have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, President Trump signed several Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress considered legislation to repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA, such as removing penalties, starting January 1, 2019, for not complying with the ACA's individual mandate to carry health insurance, delaying the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. In addition, the Centers for Medicare & Medicaid Services, or CMS, promulgated regulations to give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The United States Supreme Court is currently reviewing this case, although it is unclear when a decision will be made or how the Supreme Court will rule. Although the U.S. Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the Supreme Court ruling, other such litigation and the health reform measures of the Biden administration will impact the ACA and our business. In addition, both the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 have instituted, among other things, mandatory reductions in Medicare payments to certain providers. However, the Medicare sequester reductions under the Budget Control Act of 2011 will be suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Legislation is currently pending in Congress that would further extend the suspension through December 31, 2021. Additional legislative proposals to reform healthcare and government insurance programs, along with the trend toward managed healthcare in the United States, could influence the purchase of medicines and reduce coverage and/or reimbursement of our product candidates, if approved. Moreover, recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration's proposals. The FDA also released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed until January 1, 2023. On November 20, 2020, CMS issued an interim final rule implementing President Trump's Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, at both the federal and state levels in the United States, as well as internationally, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product candidate. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs. Moreover, we cannot predict what healthcare reform initiatives may be adopted in the future. We expect that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the new U.S. presidential administration. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic. In some non-U.S. countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. In addition, in some non-U.S. markets, the pricing of prescription drugs is subject to government control and reimbursement may in some cases be unavailable. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product, may refuse to reimburse a product at the price set by the manufacturer or may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for biopharmaceutical products will allow favorable reimbursement and pricing arrangements for elafibranor or any of our other product candidates that may be approved. Historically, biopharmaceutical products launched in the European Union do not follow price structures of the United States and generally tend to have significantly lower prices.

We currently have no products approved for sale and we cannot guarantee that we or any of our current or future collaborators will ever have marketable products. Our business currently depends substantially on the successful development and commercialization of elafibranor in PBC. Our ability to generate revenue related to product sales will depend on the successful development and regulatory approval of elafibranor in the indications we are developing in the United States, the European Union and other countries. Our ability to generate substantial revenue is also dependent on the future of the development and marketing of an IVD test using our NIS4 technology. The development of drug candidates and NIS4 and issues relating to their approval and marketing are subject to extensive regulation by the FDA in the United States, the European Union and EMA in Europe and regulatory authorities in other countries, with regulations differing from country to country. We (or a future partner of ours) will not be permitted to market our drug candidates in the United States or Europe until we receive approval of a New Drug Application, or NDA, from the FDA or a marketing authorization application, or MAA, from the European Commission (based on the positive opinion of the EMA), as applicable. The same is true for other countries, including the United Kingdom since Brexit. We have not submitted at this time any marketing applications for any of our product candidates and neither has Terns Pharmaceuticals, our development partner for elafibranor in some territories and for some therapeutic indications, for its products. NDAs, MAAs and marketing applications in other countries must include extensive preclinical and clinical data and supporting information to establish the drug candidate's safety and effectiveness for each desired indication. These marketing applications must also include significant information regarding the chemistry, manufacturing and controls for the drug. Obtaining approval of a NDA, MAA or other marketing authorization is a lengthy, expensive and uncertain process, and we may not be successful in obtaining approval. We cannot predict whether our ongoing or planned future trials and studies will be successful or whether regulators will agree with our conclusions regarding the preclinical studies and clinical trials we have conducted to date, or for ongoing trials, with our interim results. Regulatory authorities in countries outside of the United States and Europe also have requirements for approval of drug candidates and diagnostics with which we must comply prior to marketing in those countries. Obtaining regulatory approval for marketing of a drug candidate or diagnostic in one country does not ensure that we will be able to obtain regulatory approval in any other country. In addition, delays in approvals or rejections of marketing applications in the United States, Europe or other countries may be based upon many factors, including regulatory requests for additional analyses, reports, data, preclinical studies and clinical trials, regulatory questions regarding different interpretations of data and results, changes in regulatory policy during the period of product development and the emergence of new information regarding our product candidates or other products. Also, regulatory approval for any of our product candidates may be withdrawn. If we, our partner Terns Pharmaceuticals or a future partner are unable to obtain approval from the FDA, the EMA or other regulatory agencies for elafibranor, NIS4 and our other product candidates, or if, subsequent to approval, we, our partner Terns Pharmaceuticals or a future partner are unable to successfully commercialize elafibranor, NIS4 or our other product candidates, we will not be able to generate sufficient revenue to become profitable or to continue our operations.

Our tax treatment is subject to the enactment of, or changes in, tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in jurisdictions in which we operate, including those related to the Organization for Economic Co-Operation and Development's, or OECD, Base Erosion and Profit Shifting, or BEPS, Project, the European Commission's state aid investigations and other initiatives. Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received or (in the specific context of withholding tax) dividends paid. We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our financial position and overall or effective tax rates in the future in countries where we have operations, reduce post-tax returns to our shareholders, and increase the complexity, burden and cost of tax compliance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, U.S. federal tax legislation enacted in 2017 informally titled the Tax Cuts and Jobs Act or the Tax Act enacted many significant changes to the U.S. tax laws. Future guidance from the U.S. Internal Revenue Service, or IRS, and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation. For example, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, modified certain provisions of the Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, CARES Act or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

Our ability or that of a potential future collaborators to commercialize an LDT or IVD powered by NIS4 also will depend in part on the extent to which coverage and adequate reimbursement for this test will be available from third-party payors, such as government health administration authorities, private health insurers and other organizations. Insurance coverage and reimbursement rates for diagnostic tests are uncertain, subject to change and particularly volatile during the early stages of a newly commercialized diagnostic test. It is uncertain as to what extent third-party payors will provide coverage for an LDT or IVD powered by NIS4, if commercialized for clinical care. We will also likely experience volatility in the coverage and reimbursement of LDT or IVD test due to contract negotiation with third-party payors and implementation requirements. The reimbursement amounts we receive from third-party payors will vary from payor to payor, and, in some cases, the variation is material. Third-party payors have increased their efforts to control the cost, utilization and delivery of healthcare services. These measures have resulted in reduced payment rates and decreased utilization for the diagnostic test industry. From time to time, Congress has considered and implemented changes to the Medicare fee schedules in conjunction with budgetary legislation, and pricing for tests covered by Medicare is subject to change at any time. Reductions in the reimbursement rate provided by third-party payors may occur in the future. Reductions in the price at which an LDT or IVD powered by NIS4 is reimbursed could have a material adverse effect on our revenues. If we and our potential future collaborators are unable to establish and maintain broad coverage and adequate reimbursement for an LDT or IVD powered by NIS4 or if third-party payors change their coverage or reimbursement policies with respect to the LDT or IVD test, our revenues could be materially and adversely affected.

We have never generated profits from product sales and we do not expect to be profitable in the foreseeable future. The disappointing results of our RESOLVE-IT trial make profitability even less likely in the foreseeable future. We have incurred net losses over the last years, including a net loss of €101.2 million for the year ended December 31, 2020. Our revenue and other income in 2020 resulted principally from tax credits, including research tax credits, in France.  Historically, we have also received funding from co-research alliances with other pharmaceutical companies, although we do not currently have any such alliances in place. The only material revenue that we have recorded in the recent past is the upfront payment in 2019 upon signature of our collaboration and license agreement with Terns Pharmaceuticals. We are exposed to foreign exchange risk as a growing portion of our operations are denominated in US dollars, and as a result, following our March 2019 IPO on the Nasdaq Global Select Market, we chose not to convert the dollar-denominated gross proceeds into euros. We do not currently have significant recurring revenues in euros, dollars or other currencies, and as a result, we expect to face an increase in our exposure to exchange rate risk. We have devoted substantially all of our resources to our research and development efforts relating to our drug candidates and NIS4 diagnostic program, providing general and administrative support for our operations, protecting our intellectual property and engaging in activities to prepare for the potential commercialization of our drug candidates and an LDT or IVD powered by NIS4. With the exception of the upfront payment under the collaboration and licensing agreement with Terns Pharmaceuticals and revenues from our agreement with Labcorp, we have not yet generated any direct or indirect profit from the sale of our products or technologies as we do not yet have any products approved for sale. We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for elafibranor in PBC and an IVD powered by NIS4. We could also continue to have significant expenses related to the preparation for commercialization of our products, and additional infrastructure and personnel in the United States, Europe and other territories to support our product development and commercialization efforts and operations as a public company in both France and the United States. We anticipate that any such losses could be significant for the next several years as we continue the development of elafibranor and its potential commercialization, in certain indications. In addition, despite our decision in July 2020 to discontinue our RESOLVE-IT trial in NASH, we continue to have expenses for the closing of this trial. As of December 31, 2020, our losses recognized in our unconsolidated financial statements exceeded the amount of our equity, resulting in negative equity in the amount of €23.6 million. As a result, and in accordance with Article L.225-248 of the French Commercial Code, we must submit to the upcoming general meeting a resolution to decide to continue our activities. If this resolution is approved, we must nevertheless, by December 31, 2023, have reconstituted (in the unconsolidated financial statements) positive shareholders' equity at least equal to half of the share capital, otherwise any interested party could sue to dissolve the Company. As indicated above, we will likely continue to generate losses during this period and the reconstitution of shareholders' equity can therefore only take place through capital increases, strategic alliances or new licensing or co-marketing agreements generating significant income or any other transaction which allows for recapitalization.

Our ability to be profitable in the future will depend on our ability and that of our current or future collaborators to obtain marketing approval for and commercialize our product candidates, particularly our lead product candidate, elafibranor and an LDT or IVD powered by NIS4 for clinical care. We may not be successful in our efforts to obtain such approval and to commercialize our products. Obtaining marketing approval will require us or our current or future collaborators to be successful in a range of challenging activities, including: - obtaining positive results in our clinical trials;- regulatory bodies determining that clinical data are sufficient, without further clinical data, to support an application for approval, whether or not conditional or accelerated;- obtaining approval to market elafibranor;- obtaining positive results in our formal validation studies required to commercialize a test powered by NIS4 for clinical care;- expanding our manufacturing of commercial supply for elafibranor;- establishing sales, marketing and distribution capabilities to effectively market and sell elafibranor and an LDT or IVD powered by NIS4 in the United States, Europe and in other territories;- market acceptance by patients and the medical community of elafibranor;- market acceptance by patients and the medical community of an LDT or IVD powered by NIS4 as a diagnostic complement to liver biopsy for clinical care;- negotiating and securing coverage and adequate reimbursement from third-party payors for elafibranor and an LDT or IVD powered by NIS4; and - expanding our contract manufacturing for the commercial supply of elafibranor and the manufacturing under license of the diagnostic kit accompanying the potential commercialization of an IVD powered by NIS4 for clinical care. We are conducting pre-commercial activities, such as patient profiling, intended to better understand how physicians care for and diagnose NASH patients. NASH is a disease with no approved drug therapy. As such, there is significant uncertainty in the degree of market acceptance that future treatments or diagnostic tools will have among NASH patients and their healthcare providers as well as third-party payors. Even if we or our collaborators receive marketing approvals for our product candidates and commence our commercial launch, we may not be able to generate significant revenues in the near term. We cannot foresee if our product candidates will ever be accepted as a therapy in PBC eventually resulting in sustained revenues and it may take the passage of a significant amount of time to generate significant sustained revenues even if elafibranor becomes accepted as a therapy in PBC. NASH is currently an under-diagnosed disease, and we believe that an LDT or IVD powered by NIS4 will facilitate the identification of patients with NASH and fibrosis who may be eligible for therapeutic intervention. If an LDT or IVD powered by NIS4 does not obtain marketing authorization or is able to be commercialized, we, or our collaborators, may not be able to generate sufficient test volume to generate significant revenues. If elafibranor, an LDT or IVD powered by NIS4 or any of our other product candidates fails in clinical trials or do not gain regulatory approval, or do not achieve market acceptance, we may never become profitable. Our net losses have had, and will continue to have, an adverse effect on our shareholders' equity and working capital. Because of the numerous risks and uncertainties associated with pharmaceutical and diagnostic product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. The amount of future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues.