Intercept Pharmaceuticals Inc (ICPT) 2012 Q4 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals fourth-quarter and full-year 2012 financial results and business update conference call. At this time, all participants are in a listen-only mode. Following the formal report, Intercept Management will open the lines for question and answer period. Please be advised that this call is being taped at the Company's request and a webcast of the call will be archived on the Company's website for two weeks from today's date.

At this time I would like to introduce Mr. Senthil Sundaram, Intercept's Senior Director of Corporate Development. Please go ahead.

Good afternoon and thank you for joining us. Today we are reporting on financial results for the fourth quarter and year ended December 31, 2012, and providing an update on recent corporate developments for 2013. We plan to host these calls only on an annual basis. However, we may hold additional calls throughout the year to the extent and at times we believe such calls would be helpful to our investors. Before we begin, please remember we will be making certain forward-looking statements on today's call, including statements and forecasts regarding our future financial and operating performance, anticipated time lines for the potential approval and commercial launch of obeticholic acid, and our regulatory, clinical and commercial plans, goals and estimates, as well as other statements which relate to future events.

These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in our Earnings Release and in our reports filed with the SEC, including the risk factors section of our most recent quarterly report on Form 10-Q, and in our annual report on Form 10-K for fiscal 2012, when it is filed. We assume no obligation to revise or update forward-looking statements, whether as a result of new information, future events or otherwise. The format for today's call will include opening remarks from Intercept's management team, and then we'll open up the call to take your questions.

At this time, it's my pleasure to turn the call over to Intercept's CEO, Dr. Mark Pruzanski.

Thanks, Senthil, and thanks, everyone, for joining us on our year end 2012 conference call and webcast. I'm going to provide you with an update on the business activities and development of our lead product candidate, obeticholic acid, or OCA. Barbara Duncan, our Chief Financial Officer, will then discuss our year-end 2012 financial results. Dr. David Shapiro, our Chief Medical Officer, is also here with me to answer any questions during the Q&A portion of the call. We're very pleased with the significant progress that we made in 2012, which included the initiation and completion of enrollment for our POISE Phase III clinical trial with OCA and PBC, the successful completion of a private placement followed by our IPO, the advancement in OCA in additional indications beyond PBC, and the addition of a number of experienced and talented individuals to our team. On the clinical front, we completed enrollment of POISE ahead of schedule in December by randomizing 217 patients, about 20% more than our target of 180 patients. We believe that the speed and quantity of patient enrollment in POISE demonstrate enthusiasm from both clinical investigators and patients looking for an effective treatment for this disease.

The demographics and baseline disease characteristics of the patients enrolled in POISE are very similar to those observed in our Phase II combination trial of OCA in PBC patients. The trial is progressing well. The first patients in the trial have completed the 12 month double blind phase and, to this point, after all patients have been on study for at least three months, a smaller proportion of patients who discontinued due to pruritus and in Phase II, even if we assume that all such patients are in the OCA dosing groups. We believe that this decrease reflects insights into the management of pruritus obtained from our Phase II clinical trials, including the long-term extension portions of both these trials. We expect that final data for POISE will be available in the second quarter of 2014, just over a year from now.

On the regulatory front, further validation of the use of surrogate biochemical end points in PBC as predictive of clinical outcomes is forthcoming as the Global PBC Study Group, or what we've been calling the super group, sponsored by Intercept, will be presenting a poster with supporting data from over 2,100 patients at the 2013 EASL annual meeting next month in Amsterdam, while final data for the entire dataset of more than 4,000 patients is expected to be available later this year.

Additionally, an independent academic consortium in the UK recently published data in Gastroenterology from a large observational study of over 2,300 PBC patients obtained from every hospital in the UK. The results show that there's a highly statistically significant correlation between alkaline phosphatase, both alone and together with other biochemical parameters such as bilirubin, in clinical outcomes. Several different threshold values of alk phos were tested, and it was demonstrated that reductions in alk phos levels down through to less than 1.5 times upper limit normal are strongly predictive of clinical benefit. As we've stated previously, we intend to file an NDA seeking accelerated approval of OCA in the US based on the results of the POISE trial. Well ahead of such approval, we expect to finalize the design of a clinical outcomes trial in discussions with FDA over the coming months and initiated by the end of this year. Based on written scientific advice from the EMA, we continue to believe that it will accept the POISE results as the basis for approval.

On the commercial front, we're excited to have announced that Dan Regan joined the Intercept team as Chief Commercial Officer earlier this month as we look ahead to the anticipated approval of OCA. Dan brings over 20 years of pharmaceutical and biotech industry experience to Intercept, including a 12-year tenure at Genzyme, where he was responsible for the commercial aspects of its rare disease franchise. Dan's experience in the global commercialization of novel drugs for rare and specialty indications will serve us very well as we design and execute our commercial strategy for OCA. Dan will be leading our pre-commercial activities in parallel with our continued development of OCA.

Moving on to other development activities, we continue to advance OCA for additional indications beyond PBC, with ongoing Phase II trials in portal hypertension, NASH, and bile acid diarrhea. We continue to be excited by the many potential therapeutic applications of OCA across the spectrum of liver diseases, for which there is a compelling FXR-associated scientific rationale.

I'll now turn over the call over to Barbara Duncan, our CFO, for a discussion our 2012 financial results.

Good afternoon, everyone. Please refer to our press release issued earlier today for our summary of our financial results for the 3-month and 12-month periods ended December 31, 2012. I'll focus my comments this morning on an overview of our financial position as of December 31, 2012. We ended 2012 with $110 million of cash, cash equivalents and investment securities, which is on our balance sheet, which is reflecting the $86 million initial public offering and the $30 million private placement in August. Based upon our currently-expected level of operating expenditures, we believe that we will be able to fund our operations through mid-2015, which gets us comfortably past the NDA into main filings of OCA and PBC currently anticipated in late 2014.

While I won't review all of the 2012 results that we shared in our press release today, I will make a few remarks on the accounting treatment related to the periodic evaluation of our warrants. In connection with our prior equity financing, we issued warrants that are classified as liabilities and are adjusted to their fair value on a quarterly basis, with the change in net fair value being included in our net operating loss -- in our net loss. The amount included in that loss was a non-cash item, as we are not required to expend any cash to settle the warrant liability. The warrant liability is primarily affected by changes in Intercept's stock price during each financial reporting period, which causes this liability to fluctuate as the market price of our stock will fluctuate, as well as remaining term on the warrant and underlying volatility utilized in the fair value calculation.

In general, the warrant liability for the fourth quarter and the year ended December 31, increased significantly, primarily due to the increase in our stock price after our IPO. For example, for the full year 2012, the warrant evaluation expense was $24.6 million, of which -- of an expense of $24.2 million was recorded in the fourth quarter of 2012.

Let me turn the call back over to Mark.

Thanks, Barbara. In conclusion, for 2013, Intercept anticipates the availability of additional data and analyses, which we believe will support the use of our biochemical endpoint in PBC, and will focus our efforts mainly around the continued execution of the POISE trial, the completion of other work necessary for robust NDA and MAA filing and starting their preparation. The initiation of a PBC clinical outcomes trial and, of course, work toward a better understanding of commercial opportunity in PBC.

I'll now open up the call for questions. However, please note that he we will not be taking questions on the super group data to be presented at EASL next month, or the OBADIAH bile acid diarrhea data at -- to be presented at DDW in May, since they're still under embargo. Operator, please proceed with the Q&A portion of the call.

(Operator Instructions)

Akiva Felt, Wedbush.

Maybe without getting into details about the super group data in particular, but now that you have the first portion of the analysis in hand, has there been any change to your approach or time line regarding the regulatory plan for PBC or future interactions with FDA?

I don't think so. We're just keeping our heads down and executing on the Phase 3 program, and we intend to keep to our plan, which is to file before the end of next year in both the US and in Europe for approval. I think, clearly, the fact that we pulled together the super group and that the data are so clearly supportive of our thesis is very helpful, and as we have agreed with FDA, we are sharing the results on a real-time basis with them. The fact that, coincidentally, this UK PBC group published in gastroenterology this past month further corroborating alkaline phosphatase on its own and with bilirubin just increases our confidence in the regulatory path that we are taking, both in the US and in Europe.

Okay. That's helpful. I'll jump back in the queue. I had to hit star one a few times, so there may be other people lined up.

Alan Carr, Needham & Company.

A couple of them. One of mine, can you outline what are the next steps in the discussions with the FDA? Sounds like you are in -- you just mentioned that you're sharing the data from the super group analysis on a real-time basis. But can you tell us more about the process going forward with the FDA and how it might shape the ongoing POISE trial and the trial that you planned, the outcome trial that you plan to start by the end of this year? And then also, can you give us an update on the long-term experience with OCA? How many patients have been on it beyond a year, have there been any changes in safety or tolerability profile?

Sure, Alan. I would say that -- and I'll actually ask David to answer the second question. With respect to our interactions with FDA this year, our primary goal is to come to agreement with them on the -- an agreeable design for the second Phase 3 confirmatory trial and to get it started prior to the end of the year. As you know, FDA has expressed onto a number of sponsors pursuing accelerated approval, a concern and a commensurate requirement that such confirmatory studies should be well under way or substantially under way at the time that they approve, give you the first approval, the accelerated approval. And we very much intend in good faith to be substantially under way, frankly well before we even file the NDA. As I said before to you, and say to our investors, we're not expecting, necessarily, anything further clarifying from FDA in writing this year with respect to the acceptability of our specific surrogate end point, or in general. We are simply executing on a plan that we believe maximizes the probability of success that we obtain accelerated approval based on the POISE trial data and the rest of the NDA package that we submit. And David, the question on long-term exposure and safety profile?

I don't have the numbers right in front of me in terms of exposure, but we have -- we presented last year, actually, at EASL, and the year of before at AASLD data from longer term therapy in PBC from the continuation phase of long-term safety extension of both our combination study and of our monotherapy study. We had about a 60 patients in the add-on study to [tour] so patients were treated for at least a year, and then we stopped that study or that extension, and we have approximately 20 patients continuing in the extension of the long-term safety extension, who are all around the three year mark. A few patients are -- sometimes patients are longer than three years, and some patients are coming up to them.

But there have been, in both of those phases, or those extensions, we've seen a continued decrease in that improvement in alkaline phosphatase and other biochemistry levels. Pruritus is the most common symptom of the disease, as we had expected, whereas the most common symptom and otherwise in general most of the other symptoms are very much what we expect to get in a group of middle aged or somewhat more elderly patients who are followed for three years. A plethora of minor complaints, as we have presented, but no clear concerns or other signals. And a number of patients have been in for hospitalization for pre-existing conditions and other issues, and a few patients have dropped out. But essentially, the effects are robust and the study continues.

Okay. Can I ask -- add in one more follow-up here? You mentioned that baseline demographics being similar. I wonder if you could comment on percentage of between the Phase 2 and the Phase 3? Does that apply to percentage on or so with age, and that baseline I think in Phase 2 was 2.5 times the upper limit of normal for ALP was the average there. Are all those factors similar for this one?

Yes. I don't think it's appropriate to comment and give specific information about ongoing clinical trials. We don't usually do that. But I think you have hit all of the key issues for the demographics, the sex, the age of the patients, the concomitant use of urso, which is pretty high and we had those blocked out into two studies. And I can -- but I can say that yes, the population is very similar to that seen in Phase 3. And as you indicate -- in Phase 2, sorry, and as you indicate obviously the minimum level to enter the Phase 3 trial is they have to have at least 1.67 times the upper limit of normal, whereas it was only 1.5 times the upper limit of normal in the Phase 2 trials. You would -- it would be highly surprising if the mean baseline levels were not higher, but I think there's nothing surprising. I think that's fair to say, but I don't think it's appropriate to give out specific numbers for any of our ongoing clinical trials until we present that in a public scientific forum.

That's fine.

Rachel McMinn, Bank of America.

So I apologize, I missed a little bit of the beginning of the call, but I was hoping you could give us a little bit more of an update on new indications for OCA, and in particular, we're going to get some data DDW for bile acid diarrhea. And I know that you guys have talked about doing another CN portal hypertension. Can you talk a little bit about what is it that you are looking for in the bile acid diarrhea study, and give us a sense of what your development outlooks in these other indications would be dated by?

Sure. I'll begin the answer and ask David to fill in any additional detail. Let me just review the other indications that we're in right now, behind PBC. Bile acid diarrhea you mentioned, portal hypertension and NASH. And I'll speak briefly to each one of those. In bile acid diarrhea, we will have interim data available and presented in an oral presentation at DDW, and we expect the entire study to be completed later this year.

This is an open label study. There are three cohorts of 10 patients each. The first is patients with primary bile acid diarrhea, or population of interest. The second is Crohn's patients with ilial resections who have what is called secondary bile acid diarrhea. And the third is a group of idiopathic IBSD patients who have normal FGF19 levels. And remember that patients with primary bile acid diarrhea have this condition and very severe diarrhea because they have deficient FGF19 release in the gut post-pharyngeally, and therefore produce far too much bile that then causes this chronic diarrhea.

The signal we are hoping to exploit here is one that we have demonstrated and reproduced in all three of our Phase 2 trials, where we showed a very significant dose dependent induction in patients of FGF19, which was expected based on the pre-clinical data. And of course, remember, FGF19 is directly regulated by FXR, and is the (inaudible) break on (inaudible) bile acid production. This acts, of course -- this is a biomarker of FXR activation, so it proved that we were hitting FXR dose dependently in these patients. And we are now looking to exploit that mechanism in these patients. So the scientific rationale is very clear and we are hopefully looking for in so-called PVAD primary file SW patients. A very nice FGF19 signal with symptomatic improvement, and we hope to show, ideally, more of a signal in these patients than the two other control cohorts. In terms of a next step there, that's something that we are currently discussing, and so I don't have any further information on that.

In terms of portal hypertension, as you know, we have presented interim data on the first 10-milligram dose cohort at AASLD this past November showing positive response in six of eight patients evaluated for efficacy, showed a reduced portal pressure. At least one of the two co-primary end points, and the sixth just missed. And these eight and a further four evaluated just for safety, tolerated OCA very well at that dose. We are currently testing a 25-milligram dose at the same center at UCL in London, and have initiated a second corroborating 10-milligram dose cohort at a site in Belgium. And I think that what we're looking for there, Rachel, would be additional corroborating data from another site in a certain minimum number of patients. That would give us the confidence to commit to doing a placebo-controlled longer term, let's say, three-month Phase 2 trial with the idea that we might look at patients both on beta blockers as add-on therapy, and potentially monotherapy. So that's currently what we are thinking, but we obviously need to wait for additional data. We do expect to complete both of the ongoing cohorts by the end of this year.

Finally, in NASH -- sorry, go ahead.

I guess before you get to NASH, what I -- one of the things that maybe I should ask the question this way. That's a super helpful review of the data, but I'm just wondering, as you look at these opportunities maybe you can give us some insights into how you're thinking about it. PBC is a relatively rare indication and as you think about your -- what you were thinking about for pricing, how elastic is that pricing model for some of these indications that you're considering? And would it make more sense in one market versus another to come up with a second molecule that would be distinct so you could price it differently? Or do you feel like all of these indications are rare enough that it would support the pricing that you were thinking about for PBC?

Yes, no, great question. And again, I'll answer it with the caveat that we just brought Dan on board as our CCO, and we'll be doing a lot more detailed work to analyze this. But the good news is, we're not a one trick pony. Behind OCA, we have other compounds in the pipeline, as you know, including INT-767 and others. And so we have the luxury, I think, in establishing a proof of concept, let's say, in an indication that might not necessarily be commercially synergistic with the kind of orphan focus of OCA to then move to a follow-on or backup compound and take it in that direction. One indication that obviously comes to mind here would be the primary bile acid diarrhea indication which, if as the investigator in the study claims who's published this, it's true that these patients could represent up to one-third of all IBSD patients out there, which could in theory mean up to 1% of the entire general population. That's obviously not an orphan indication, and this might be one where, if we do establish a proof of concept, we might look to a follow-on compound to address.

I think with respect to portal hypertension, that is -- it's not an orphan, but it's an orphan-like indication in as much as there's nothing available, nothing approved to treat these patients, and there's a very clear high unmet need and they're in the care of hepatologists. So we feel that that indication is quite synergistic with PBC and getting a label for it, expanding a label for it, would not necessarily be price-eroding for the compound. And even in NASH -- and I know, Rachel, that you commented on this in your initiation note. I think we need to do a lot more work on NASH, and clearly it's thought of now as the most prevalent liver disease in developed countries.

But I think there would be a rationale there to go initially, after -- to treat patients with confirmed disease and advanced disease, patients i.e. who are being seen by hepatologists and patients who are likely going to run into problems, morbidity, mortality issues due to their NASH, rather than just having the disease and running into problems first because of diabetes or atherosclerosis. And again, I caveat this saying that we need to do a lot more work in understanding how to target NASH, but I don't necessarily believe that NASH will be inaccessible to us or that would -- would, by the time we get there and get the approval to -- for the indication, would not be synergistic with the other indications that we've launched for with OCA.

Really appreciate the insights and the detail.

(Operator Instructions)

Jim Molloy, Janney.

Rather -- I don't want to ask specifically about the super group, but I noted you're going to have the EASL -- at EASL, you have interim look at the super group. How predictive of how the whole trial might look should we expect that to be, or how informative should that be, that interim look?

I'll hand that to David.

We have sponsored this collection of data from a number of centers, based upon our interactions with a number of groups who looked at our Phase 3 and other end points based initially on some publications from Toronto. And all of those large groups who have got an interest in this field, their data and their results were remarkably similar. So I think our perspective, without obviously having seen what we will get finally over what is being presented next month in Amsterdam at EASL, will be that as the numbers get larger, I hope and expect the data will get stronger. The effect of any particular one center is more diluted, and I think that overall our thesis has been all along, and all of the published data is highly supportive of the more normal your biochemistry with alkaline phosphatase and bilirubin, the better off you are, and that has been our thesis going into this. So we'll have the first set of data then, and I think if that's well received, I think we will -- I see no reason to be particularly worried as that data set gets larger. In fact, au contraire, I think as it gets larger I think it will get better.

Excellent. And I know -- yes?

No, Jim, and I would only add that one thing we can talk about publicly now, and we just have to wait a month or so for EASL, but we think it's been enormously helpful that this UK group published in Gastroenterology, and if you look at -- in that paper, if you look at their supplementary figures, and supplementary figure three to be exact, you can see the Kaplan-Meier survival curves on outcomes in PBC, evaluated against four previously published biochemical end points. Two of those end points were on alkaline phosphatase on its own, and two others were on alk phos plus bilirubin, and in the case of the Paris criteria, AST as well. And you can see there that across the continuum of increased or elevated values of alk phos, for three times upper limit normal down to less than 1.5 times upper limit normal, keeping in mind our end point is at 1.67, that there's a very, very strong correlation. We're talking about P values in -- down to the 10 to minus 16 for one of those end points. There's very, very strong correlation with clinical benefit, clinical outcomes. So we expect to see that duplicated with the super group dataset. I hope that addresses the questions as best we can at this point.

It does. And how -- and I know that Europe is on board with this, have your directions with the FDA, obviously they're moving in that direction as well and getting better. Do you think this gets them over the top, or will you really ever know?

You could say when, to be cynical, one never knows with FDA until you get that approval letter. But we, look, we are very confident. With Europe we have said this before, we have it in writing from them, our specific end point and trial are good enough for them. With respect to FDA, the option that we have right now with the surrogate end point is divided under subpart H guidelines, if the accelerated approval pathway, and we're very confident. And we talked about this before, that frankly the pendulum has swung back in favor of sponsors like us, especially in the context of pursuing rare and life-threatening diseases under the -- under PDUFA 5, the enhanced accelerated approval mandate that requires FDA now to get more creative in accepting surrogate end points for approval. And we feel that the reason that FDA and, specifically, in our case, the GI division has gotten pretty excited about what we're doing, and I use that word deliberately, is because I think we're really trying to is -- what we're trying to do is follow a best practice here in pulling together the best possible evidence in support of our surrogate end point being reasonably likely to predict clinical benefit in PBC, and that of course is the test, the surrogacy test for accelerated approval.

Excellent. Last question is, should -- would you to have an opportunity -- excuse me, easy for me to say, to accelerate one or two of your trials, which would be the one or the two that you would say, that's the one we want to move forward next or faster?

Do you mean indication? That's a good question, but that's difficult to comment on, Jim. I'd say all of them. One thing we're doing here is, we've been very carefully selecting -- there are really a number of different therapeutic, potential therapeutic applications of an FXR agonist that we could address with OCA and our other compounds. And I think we've been very careful to try to prioritize indications where there are patients with true unmet medical need, and it's hard to prioritize one over the other. So that's all I think I can say right now. But obviously, if you could find us a way to accelerate getting trial results or closer to approval in any one, please let me know. (laughter) One more question, guys.

Jim Birchenough, BMO Capital Markets.

This is Nick standing in for Jim. Yes. I know you can't really comment on the baseline demographics of the Phase 3 POISE trial, but can you provide a little bit more information with regards to whether the baseline demographics like the criteria such as the alkaline phosphatase or bilirubin bookend around Phase 2, where they tend to be skewed one way or another to the high or low side of the Phase 2? And then from a blinded data, can you tell whether pruritis is of a similar magnitude to that observed in Phase 2?

Sure. As David commented before, and as I also commented in my initial remarks, the baseline demographic characteristics of the PBC population in our POISE trial really is very similar to that of our Phase 2 trial, the combination trial specifically that it's modeled on. And as David also mentioned, just to remind you, the entry criteria for POISE differ from the Phase 2 in one meaningful way, being the increased floor for baseline alkaline phosphatase at 1.67. Obviously our end point is that -- is defined at that threshold as compared to the Phase 2, which was 1.5. So proportionately speaking, there's an increase in baseline alk phos. But I think that's the best we can do.

I think that the spread of patients across the spectrum of elevated values is very similar. So -- and I don't think it's appropriate to comment further. In terms of pruritis, I had mentioned in my openings remarks that, of course we're blinded, but even if we assume that all of the patients who have discontinued to this point due to pruritis are in one of the two OCA dose groups, i.e. no placebos, only from the OCA groups, we are doing significantly better in terms of discontinuation rate. And I think we won't know until we un-blind, but we knew this time to expect it, and there are some tried and true ways to manage pruritis that investigators are implementing successfully, we feel.

Excellent. Perhaps just one final quick question. Have you requested breakthrough designation therapy for OCA in PBC?

We have not. It's funny, we're getting a flood of questions on breakthrough, and I think breakthrough is interesting as a designation, but with respect to PBC, given that we're already well under way in a pivotal randomized Phase 3 trial, we're not necessarily clear that it would help accelerate or improve the probability in getting approval. However, we, like any other company, with a breakthrough, we believe of course we have -- OCA is probably -- is essentially a breakthrough therapeutic, we can certainly look into it and it might help with other indications.

Yes. Okay.

I'd like to thank everyone on the phone for your interest in listening in today, and the questions that you have posed. We very much appreciate your support of Intercept as we move this exciting story along, and we'll look forward to interacting with you -- those of you who are at EASL next month, and otherwise over the course of this year.

Ladies and gentlemen, thanks for participating in today's program. This concludes the program. You may all disconnect.