The study is a two-arm (placebo, lanifibranor 800 mg/day), randomized (1:1), double-blind, placebo-controlled, 24-week treatment study. Thirty four (n=34)patients with T2DM will be randomized, allowing for a 10% drop-out rate. The diagnosis of NAFLD on imaging will be done by measuring IHTG using the gold-standard magnetic resonance and spectroscopy (¹H-MRS) technique. Ten non-diabetic subjects without NAFLD will also serve as a control group for the metabolic and imaging procedures. The study will last 34-36 weeks (\~6-8 weeks for run-in, 24 weeks of treatment and 4 weeks post-study follow-up), with an estimated recruitment period of \~9 months. Patients with uncontrolled T2DM and a diagnosis of "fatty liver" per history (elevated AST/ALT and/or liver fat on liver ultrasound or ¹H-MRS and/or other appropriate imaging technique - see below). Participants may be treated by diet only, or be on a stable dose of metformin and/or a sulfonylurea and/or a DPP-IV inhibitor for ≥ 2 months prior to enrollment. If the HbA1c is ≤8.0% on any of these diabetes medications, the dose of these medications will be kept stable throughout the study and baseline studies performed as outlined below. If the HbA1c is \> 8.0% but ≤ 9.5%, metformin (minimum dose required: 1,000 mg/day for metformin) and/or a sulfonylurea (minimum dose required: glimepiride 2 mg once daily) will be added, or doses maximized, during the first 2 weeks of the lead-in period. Afterwards, patient's metformin or sulfonylurea dose will be maintained at the new dose stable for 4 weeks before baseline metabolic and study-specific liver imaging.

After patients sign the informed consent and meet eligibility criteria, baseline imaging and metabolic studies will be performed. These will include measurement of IHTG by 1H-MRS, liver fibrosis by VCTE (Fibroscan) and MRE, and additional imaging by T1 MRI mapping. Metabolic testing will be done with the patient being admitted to the CRC (clinical research unit) for an overnight stay. Assessment of insulin sensitivity and DNL will be done with the administration of stable isotopes of glucose (intravenously) and deuterium labeled water (orally) to measure glucose and lipid turnover and substrate oxidation (with indirect calorimetry) during a euglycemic hyperinsulinemic clamp.

After all baseline tests are completed, patients will be asked to take a therapeutic dose of 800 mg lanifibranor (QD), or placebo, for 24 weeks. They will be closely followed by study staff every 4 weeks with visits to the CRC and interim phone calls. At 24 weeks, all baseline tests will be repeated and treatment considered completed. There will be a final, off-drug, safety follow-up visit 4 weeks after treatment at week 28. After this the participant will have completed all study procedures.

Note: The investigators recalculated the sample size for the primary endpoint of change in intrahepatic triglyceride (IHTG) measured by 1H-MRS with lanifibranor (800 mg/day) vs. placebo based on the data from the population with diabetes from the Phase IIb NATIVE (NCT03008070: NAsh Trial to Validate IVA337 Efficacy; liver histology results) and comparing to prior studies by Dr. Cusi et al that had simultaneous liver histology and liver fat measured by 1H-MRS (Belfort et al, NEJM 2006; Cusi et al, Annals Int Med 2016). From this analysis, the required sample size per group calls for 15 patients in each arm (lanifibranor vs. placebo) to complete treatment. Conservatively assuming that 10 % of the randomized patients will not complete the trial (dropouts), the total number of patients to be randomized is 33-34 patients.