Intercept Pharmaceuticals Inc (ICPT) 2014 Q2 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals' second-quarter 2014 financial results and business update conference call.

(Operator Instructions)

Please be advised that this call is being taped at the Company's request and a webcast of this 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, sir.

Good afternoon, thank you for joining us on today's call. We're reporting our financial results for the quarter ended June 30, 2014 and will also be providing an update on our development programs including an update on the additional positive FLINT data included in today's 10-Q filings.

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, the POISE, FLINT and other trials of obeticholic acid, or OCA, anticipated timeliness for the potential approval and commercial launch of OCA, 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 carefully read the important risks and uncertainties described in our reports filed with the SEC including the risk factors section of Intercept's most recent annual report on Form 10-K, Intercept's quarterly report on Form 10-Q and Intercept's other filings with the SEC. We assume our obligation to revise our update forward-looking statements whether as a result of new information future events or otherwise.

The forum for today's call 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 to our CEO, Dr. Mark Pruzanski.

Thank you, Senthil, and thanks to everyone for joining us on the conference call and webcast today. I'm going to provide you with an update on the development of our lead product candidate obeticholic acid, or OCA. Barbara Duncan, our Chief Financial Officer, will then discuss our financial results and cash runway.

First item I'd like to cover today is our program in primary biliary cirrhosis, or PBC. Our supporting studies are proceeding on track and we continue to anticipate completing our NDA and MAA filings in the first half of 2015. We will continue to work closely with FDA and MAA and are preparing for pre-NDA and pre-MAA meetings that we anticipate will take place in the fourth quarter of 2014. We believe that a successful outcome of these meetings will give us increased confidence in our regulatory strategy for OCA in PBC and set the stage for filing our NDA and MAA.

We also recently announced that FDA granted us Fast Track Designation for our PBC program which will allow us to request submission of the NDA on a rolling basis as each section is completed.

Since our last quarterly update, we've also made significant progress toward finalizing a protocol with FDA for our confirmatory Phase 3 clinical outcomes trial in PBC. We continue to expect trial initiation around year end 2014 with completion of the trial to occur on a post marketing basis in support of eventual full approval in accordance with FDA's Subpart H guidelines. We've not yet officially finalized the trial protocol and submitted it yet to FDA but I can provide some general specifications regarding the trial.

We currently expect to enroll about 300 to 400 patients with severe PBC, as characterized by very significantly elevated alkaline phosphatase, or ALP, greater than 5 times the upper limit of normal and/or abnormally elevated bilirubin of up to 3 times the upper limit of normal. We intend to use a composite endpoint that will include death, liver transplant and then so-called MELD score greater than 15, the point at which patients with advanced liver disease are typically placed on the liver transplant list.

Moving on to other indications. We are also excited to announce that we remain on track to launch our first clinical trial of OCA in primary sclerosing cholangitis, or PSC, at the end of this year. We recently submitted an IND to FDA for this indication and posted information on the trial for a placebo-controlled dose ranging Phase 2 trial on the www.clinicaltrials.gov website.

Like PBC, PSC is a rare autoimmune cholestatic liver disease, though distinct characteristics. PSC is an orphan indication with a prevalence of about 1/3 that of PBC, with no approved therapies available. Therefore representing a very significant unmet medical need. We intend to study the effects on levels of ALP phos, ALP, the same liver enzyme marker we've assessed in our PBC trial. PSC patients enrolled in our Phase 2 trial will receive 24 weeks of treatment with either placebo or OCA with single daily doses ranging from 1.5 migs to 10 migs.

We're really excited today to share news with you regarding the results from the FLINT trial, and I know a lot of you have been waiting for quite some time as have we. The NIDDK recently sent us a draft manuscript describing the FLINT results which it intends to submit for publication. Since the manuscript is in draft form and is expected to undergo pure review, it's subject to further modification prior to publication. The NIDDK has expressed to us a preference to avoid any publicity concerning FLINT results ahead of publication and public presentation to the medical community that's anticipated to occur in the late breaker session of the upcoming AASLD, the American Association for the Study of Liver Disease conference on November 10, 2014.

In the spirit of our collaboration, we do not intend to issue a separate press release, provide any further information about the trial results other than those disclosed in our quarterly report on provide any statements or interviews in response to media requests. Furthermore, the NIDDK has indicated to us that neither it nor the FLINT investigators will provide any comment in response to third-party inquiries for information on the FLINT trial until after the results have been published and presented.

We will share with you today top line results of the trial including key efficacy endpoints and a summary of safety and tolerability. We do not want to jeopardize the potential for a scientific publication or presentation. Therefore, we request that investors, analysts and the media respect the NIDDK's and our wishes to defer inquiries for additional information and statements until after the data has been presented at the appropriate scientific forum.

FLINT was a double-blind placebo-controlled 72-week trial in 283 NASH patients with biopsy-proven NASH comparing once daily 25-milligram OCA and placebo. Following the 72-week treatment phase, there was a 24-week follow-up phase and final 96-week visit. To be enrolled in FLINT, patients had to have biopsy-proven NASH with a NAFLD activity score or what's called NAS of at least four out of a total possible score of eight. Fibrosis was scored separately on a scale of zero to four and FLINT patients could have no fibrosis or up to Stage 3 fibrosis or bridging fibrosis. Patients with Stage 4 consistent with cirrhosis were excluded from the trial. All of the FLINT results that I will now report come from the draft FLINT manuscript provided to us by NIDDK.

So to begin, the proportion of patients meeting the FLINT primary endpoint defined to the decrease in the NAS of at least two points with no worsening of fibrosis at the end of the 72 week treatment phase was 46% in the OCA group and 21% in the placebo group with a P-value of less than 0.001. Notably, sub group analysis of the primary endpoint revealed numerically higher response rates in OCA treated patients with more advanced NASH as characterized either by NAS, fibrosis stage, or co-morbid type 2 diabetes.

The response rates in FLINT appear to be similar to the response rates seen in the PIVENS trial, a NASH trial conducted by NIDDK that evaluated pioglitazone and vitamin E. That said, I'd like to highlight a couple important differences between the two trials.

First the treatment duration in FLINT was shorter at 72 weeks as opposed to 96 weeks for PIVENS. Second, the patient population in FLINT had more advanced disease, nearly half of the patients had co-morbid type 2 diabetes and our overall population presented with higher baseline NAFLD activity score and fibrosis scores. Finally, some patients in FLINT were taking vitamin E and glitazones, medications that have been studied for the treatment of NASH.

Now moving on to secondary endpoint. OCA also produced generally equivalent statistically significant improvements in each of the components of the NAFLD activity score. As a reminder, the NAS, the NAFLD activity score is comprised of three such components that are individually scored, steatosis, lobular inflammation and hepatocellular ballooning. On the secondary endpoint of NASH resolution, although there was a positive trend, the 10 point did not reach statistical significance. As a reminder NASH resolution is different from the NAFLD activity score and provides a global assessment of whether a patient would be diagnosed with NASH.

The rates of NASH resolution were substantially lower in both the OCA and placebo groups than those observed in the PIVENS trial. However, apart from consideration given to the differences between the two trials I just noted before, without more detailed histological data and other relevant information, we're not in a position to speculate further as to why the bar appears to have been higher to achieve NASH resolution in the FLINT trial as compared to PIVENS.

Let me now turn to fibrosis, which to remind you is the scarring that can occur in NASH and other chronic liver disease patients with the potential to progress eventually to cirrhosis and in some cases liver fail our or cancer. We were very pleased to see that 72 weeks of OCA treatment resulted in a statistically significant improvement in fibrosis with a P-value of 0.01. The improvement in fibrosis was observed in just over one in every three patients, nearly double the response observed in patients receiving placebo. The mean fibrosis change in FLINT was relatively small with a placebo adjusted improvement of just under one-third of a stage, although this is not unexpected given the narrow fibrosis scale of zero to three in the population studied and the relatively short period of therapy.

The fibrosis benefit with OCA treatment is the first time we are aware of that a therapeutic has been shown to significantly improve liver fibrosis in a meaningful proportion of NASH patients, an unexpected and positive finding. I'd like to make a few observations as to why we believe the reported fibrosis benefit is particularly striking. First, the FLINT trial was not powered to demonstrate a fibrosis benefit and there were only 200 patients with paired liver biopsies in the trial.

Second, patients were not required to have fibrosis to enter the trial which means that a proportion of patients could by definition not experience any fibrosis improvement. Third, 72 weeks is a relatively short time to assess changes in liver fibrosis.

And fourth, we maintain the view that halting progression of fibrosis which was observed in an even larger proportion of FLINT patients receiving OCA treatment is in and of itself a clinically meaningful outcome. It will clearly be very important for us to be able to review the fibrosis results for the various subgroups of patients including those with more or less advanced fibrosis, once we have them in hand. If the ability of OCA to improve fibrosis along with the other histopathological features in NASH is replicated in Phase 3 and long-term safety is also demonstrated, we believe this therapeutic benefit would represent an important turning point in the treatment of NASH patients.

The histological improvements observed in OCA treated patients were accompanied by significant reductions in serum liver enzymes, ALT, AST and GGT, all of which had been abnormally elevated at baseline. There was also a modest decrease in bilirubin and increase in alk phos, although both stayed within normal limits. These five file chemical parameters tended to return to pre treatment values at the end of the 24-week follow-up phase after stopping OCA treatment. The changes in liver enzymes seen on OCA treatment in FLINT were generally consistent with the effects observed in our prior six-week trial in diabetic NAFLD patients.

Moving on to other secondary endpoints. OCA was also associated with changes in metabolic parameters. In particular, OCA patients experienced the modest but statistically significant weight loss and stable blood glucose control as measured by glycosylated hemoglobin A1c, again, as observed in our previous six-week trial.

However, there was an anomalous result observed in a marker of fasting hepatic insulin resistance called HOMA IR which increased in the OCA treated patients at the end of 72 weeks. This finding is difficult to interpret particularly because there was an even larger HOMA IR increase in the placebo group during the 24-week follow-up phase than seen over 72 weeks in the OCA treated patients. In addition, this finding is also at odds with the results in our previous six-week study showing improved hepatic insulin resistance based on the gold standard glucose method.

Given the extensive public interest in lipid effects observed in FLINT, and the potential cardiovascular safety concern that has resulted, we have provided a lot of detail in our quarterly report on lipid levels at baseline, 72 weeks of treatment and 24 weeks after treatment discontinuation. A 72-weeks modest but statistically significant increases in total and LDL cholesterol and decreases in HDL cholesterol were observed in the OCA treated patients. A decrease in triglycerides was also observed but this was not statistically significant at the end of treatment.

The time course of the lipid changes is particularly interesting. The cholesterol changes peaked at the first 12-week time point assessed on study, then decreased in magnitude through the remainder of the 72-week treatment phase and then effectively returned to baseline during the 24-week post treatment follow-up phase. The following total cholesterol and LDL over the study period could be related to more rigorous cholesterol management implemented during the trial although we cannot draw any firm conclusions until we see an analysis of the impact of statin therapy.

The incidence of adverse events, or AEs, in FLINT with similar between groups for all symptoms except pruritus. OCA treated patients experienced a higher incidence and grade of mostly moderate pruritus resulting in the discontinuation of one patient. The draft manuscript did not describe the time course of pruritus over the course of the trial. We note in our PBC Phase 3 trial, pruritus incidence and severity declined over the course of 12 months.

The incidence of severe or life threatening events was not different between the two treatment groups and most events were deemed unrelated to treatment including all severe or life threatening cardiovascular events. The only two patient deaths in FLINT were those that we previously disclosed in our 10K, and in contrast to what we previously reported, neither death was considered to be related to treatment.

I would like to take this opportunity to express again our gratitude to NIDDK, the FLINT investigators and others working with the NASH clinical research network as well as the members of the data coordinating center for their longstanding commitment to identifying effective therapeutics for the benefit of NASH patients. We believe their efforts to conduct and complete the FLINT trial marks an important milestone moving the entire field forward, and of course, in the advancement of OCA for this critically important indication.

We realize that many investors are eager to understand more about our plans for our potential Phase 3 design and pediatric NASH Phase 2 trial including the specifics of regulatory endpoints and patient population. However, we feel that it would be premature to provide more guidance until we have the full set of FLINT data in hand and receive feedback from regulatory authorities. We remain committed to advancing OCA for the treatment of NASH as expeditiously as possible, and based on timely availability of the full data set, we continue to plan for a Phase 3 program start in the first half of 2015.

As a reminder our Japanese collaborator, Sumitomo Dainippon Pharma, please note the recent name change of the company, is also conducting a placebo-controlled Phase 2 trial of OCA in 200 NASH patients with data expected by the end of 2015.

In conclusion, I'd like to summarize the results from the FLINT trial with three key takeaways. One, the results from the FLINT trial give us increased confidence in our plans to advance OCA for the treatment of NASH and we look forward to working with FDA and EMA to expedite development. Two, the unprecedented and unexpected fibrosis benefit observed with OCA, despite the challenging and heterogeneous patient population treated for a relatively short period of time gives us increased confidence that OCA has the potential to be an important medicine for patients with NASH and advanced NASH.

Three, we are fully committed to continuing our close collaboration with NIDDK and the FLINT investigators and I'd like to reemphasize that we do not plan on making any additional information disclosures beyond the 10-Q and today's call in order to preserve discussion at the appropriate scientific forum. I'll now turn over the call to Barbara Duncan, our Chief Financial Officer, for a discussion of our financial position.

Thanks, Mark, and good afternoon, everyone. Please refer to our press release issued earlier today for our summary of our financial results for the three and six-month periods ended June 30, 2014. You will note that we had net income this quarter, mainly due to the recognition of a non-cash gain of approximately $56 million that was associated with the exercise of all outstanding warrants in April. Going forward, there are no warrants outstanding, so we will no longer have the associated non-cash warrant income or expense.

We ended the second quarter with $299 million of cash, cash equivalents and investment securities available for sale on our balance sheet. During the past few months, we have been evaluating our infrastructure and requirements for the build out of a world-class organization. The analysis is not yet complete, but we have identified that the development of the infrastructure needed to best position us for maximizing OCA's potential in PBC, NASH and other liver diseases, the potential launch OCA for PBC in North America, Europe and other countries, the investment in the adequate commercial supplies and the continuation of our investment in research and development, the Company will need additional resources. Thus we are changing our guidance and our cash runway to mid 2016 to incorporate these identified areas of growth. Let me now turn the call back over to the Operator to proceed with the Q&A portion of the call.

(Operator Instructions)

Our first question comes from the line of Jonathan Eckard of Citi.

Good afternoon and congratulations on the data, what a sigh of relief. So quick question and I'll try to maybe take a step back so not put you too much in a corner. Versus what a lot of people may be anticipating as an improvement in resolution of NASH versus an improvement in fibrosis broadly speaking, does one trump the other? I think that there's been other companies saying that resolution of NASH recently in FDA meetings is an approval endpoint. Without you trying to say pinning you in the corner of what the pathway forward, if you two days ago had to say if you had a choice I'd rather go after fibrosis versus resolution of NASH, is there a fair hierarchy of what will be a preferable endpoint to go after?

Jonathan, it's a very good and important question and frankly, we're here digesting the results realtime. We certainly, as I mentioned during my scripted remarks, were not expecting the fibrosis benefit and I think you know why. So this does provide us an additional ace in the hand so to speak and certainly it's something that we need to think about and discuss with the regulatory authorities.

You're right that recent speculation, and including from us based on what we've been hearing but not directly from the regulators, is that NASH resolution may be utilizable as the primary endpoint of future NASH trial. And as I mentioned we were somewhat surprised. I think at this point, we need -- we've got a series of hypothesis including -- starting with the differences in the FLINT population from for example, the PIVENS population, but hypothesis as to what might be going on. We clearly need to get a lot more of the data in hand and to really understand the phenomenon.

I think it's also important to understand that NASH is a really heterogeneous disease and FLINT certainly enrolled a pretty heterogeneous NASH population. We, based on the data that we end up getting from FLINT, I think we'll be able to make a really informed decision in conjunction with our discussion of FDA and EMA in how to do patient, appropriate patient solution, what endpoints to go for and finally, what population to go for.

This is such a massive epidemic and therefore frankly market opportunity that I've got no doubt that we can find the appropriate population to target first. And beyond that, I think it's just impossible to speculate further on how this will shape our Phase 3 program.

And then just one last question and I'll let everybody else go. On the severe life threatening events, it seems like the prior announcement that there was an imbalance seems now is this based on the reassessment by a different group that made this, that's divergent versus that last kind of flag that NIDDK raised or the DSMC raised? I'm trying to understand what could have lead to what was an imbalance now being not balanced.

Again a very good question, and we are not privy to the deliberations that went on internally amongst the NIDDK, the investigators in DSMC, but clearly there is a change perhaps on some adjudications that took place since our last disclosure that resulted in a reclassification at least of the patient death as unrelated. And in any case, I can certainly tell you that we are very pleased to see the results with respect to not just the serious cardiovascular events but safety in general, which appeared to be from the data we have, the drugs seem to be safe in this population over the treatment period. And that's all I can speculate on now.

Well I'll get back into queue. Congratulations again.

Thanks, John.

Our next question comes from the line of Michael Yee, RBC Capital Markets.

Hi, thanks, congratulations as well. Question on lipid effects. Maybe you could comment on a little bit more information around that as it relates to what percent of patients run base line statins or had statins throughout the study? You commented that LDL went up but at the end of 72 weeks it ended at plus nine, so presumably it was higher and then it was managed with statins. So is that what was going on there, maybe you could comment on the clinical meaningfulness of that data?

And then the second question is on the fibrosis effects, clearly a great statistical (inaudible) result but perhaps a question about clinical meaningfulness. So is the thought from your view that obviously over time that gap is going to widen as one group gets worse and one group is getting better that they only gets better over time, is that the thinking? Thanks.

Thanks, Michael. Yes, so let me take your questions in turn. With respect to lipids, I think we've disclosed what we know and I agree with you, it's very important to see what statin management looked like over the course of this trial. And as we speculated, certainly some of the apparent benefit and the seeming reversal in trend for changes in LDL for example, could very well have resulted from improved and more vigorous cholesterol management over the course of the study.

I think in any case we were given the concern that's been out there for the last seven months or so about lipid effects. We were very, very pleased to see pretty similar pattern to what we've observed before. There was, in the six-week study that we previously published, there was certainly an increase in LDL, which appeared by the end of that period to be plateauing. And the same thing seems to have happened here. We got a peak that at the first time point, 12 weeks. But then at all times points after that, LDL was coming back in. And lipids in general by 72 weeks came back in and off drug, off treatment essentially returned to baseline values.

All that said, we clearly with an effort saw agonist with OCA, we clearly have interactions with lipids and lipid metabolic effects. And as we've been saying for some time, we're absolutely committed to very detailed study of this phenomenon as we've done in our first indication of PBC where we're conducting a detailed lipid metabolic study, we'll be doing the same in NASH.

Now your second question was about fibrosis and what we make of this now in terms of the results at 72 weeks and then over longer periods of therapy. I certainly agree with the premise of your question, that from our standpoint, this is highly clinically meaningful. Remember that just knowing that we halted progression of fibrosis in a very substantial proportion of patients in meeting the primary endpoint is considered clinically meaningful.

We're stopping the disease in its tracks. And as you know patience with chronic liver disease even Stage 2, even Stage 3 liver fibrosis can live relatively happily with compensated disease for a long period of time. And really the name of the game is to prevent progression to cirrhosis and eventual decompensation and potential hepatocellular carcinoma. So that said, we're thrilled to see a [stats big] benefit and even a seeming reversal.

Now the other thing to your question about time frame is also very important because 72 weeks is in the context of a chronic fibrogenic process that we see in NASH and other chronic liver diseases is almost the blink of an eye. And it takes a long time, this is the result of years and years sometimes even decades of scarring, progressive scarring in the liver. The liver is trying to regenerate a turnover scar. And so it's surprising to see the kind of effect that we have just over one in three patients with an improvement. And I can't wait to see what this drug can potentially do with longer term therapy.

Okay, thank you.

Our next question comes from the line of Alethia Young of Deutsche Bank.

Great thanks for taking my question and congrats on the data, guys. I wanted to go back to the NASH clearance and ask a couple questions. One were you powered for NASH clearance? And then how many biopsies did we have in that NASH clearance endpoint? And then the last question is what kind of things effect NASH clearance and talk a little bit more about how it's measured and what it means numerically, please?

Good questions, Alethia. We were powered on the primary endpoint which as you know is NAFLD activity score improvement of two points. And NASH clearance, as I mentioned in my remarks is something different. It's determined by global histopathological assessment, which obviously incorporates elements of NAFLD activity score but goes beyond that. And one thing that we have to learn frankly and get smarter on is how exactly did with the histopathological global assessment done in FLINT and what the meaning of this is. So I think in answer to the first part of your question, no we weren't necessarily powered for any secondary endpoint here.

In terms of the number of paired biopsies, we put that in the Q, we believe it's 200 patients across both groups. So a little bit of a bigger sample size than what was reported on the PIVENS, if you're looking to that as a comparator. And the third part of your question was?

Talking about like what NASH clearance by definition means on the scoring system, the NASH scoring does it means zero? And then also some of variability and effects that are seen in measuring biopsies?

Yes, and well -- so when you do the -- so I can't speak knowledgably to all the aspects of what go into assessment of NASH resolution and there are -- there's a read out there of it doesn't necessarily mean black and white, no improvement, yes improvement, right? You can have stages of improvement as determined for example, by a NAFLD activity score but not quite reach resolution.

So as in my answer to the previous question about time course of treatment and what we could hope to see over longer periods of time with fibrosis, again, this is in a lot of these patients with advanced disease a relatively intractable problem, a lot of the patients in FLINT had diabetes, underlying diabetes which drives a lot of the elements of more aggressive standard hepatitis. So I can't speculate what would happen with longer term therapy, but perhaps we could expect to get more patients fully resolving. But again, I wouldn't mistake NASH resolution as a black/white, yes/no patients responding to therapy or not.

Great, thanks.

Our next question comes from the line of Jim Birchenough of BMO Capital Market.

Hi, it's Nick in for Jim this afternoon. A couple questions. First is on dosing, I know you don't want to talk about Phase 3 design, but do you have from all of the clinical data that you've collected with OCA any pharmacodynamic markers that tell you you think 25 milligrams is optimum dose? You could argue that given the safety profile looks good that a higher dose you might see more fibrosis. You could argue or gosh we could back off a little bit and give ourselves a bit more of a barrier in case in a larger broader population we do see some safety signals?

And then my second question is on fibrosis. This is -- it comes out as zero, four point but really it is -- it's a linear scale isn't it? there is no -- it's a continuous scale, so how do you define fibrosis improvement and is that something that needs to be adjudicated by a blinded third party? Thanks.

Nick, both great questions, thank you. With respect to dose selection, let me take a big step back and remind everyone that frankly going into Phase 2 in PBC and other indications, we clearly underestimated the potency of OCA in humans based on animal data. And as you know in PBC, we made what in retrospect was a very wise decision to include a second dose group, a titration dose group and test at a lower dose of 5 migs to 10 migs which looks like it could be what we go with commercially based on the improved safety profile.

So in NASH again, as I said before, it's too early to speculate on the specifics of our Phase 3 design but I wouldn't rule out going with something if not also at 25 than perhaps even a lower dose than 25. So far in patients like these NAFLD NASH patients at the lowest dose we studied, we also studied 50 migs. So -- but again, it's a good question and the answer is a qualified maybe.

With respect to fibrosis and what does improvement mean, I just want to correct because it's a 0, 1, 2, 3, 4 doesn't really mean that it's linear. There are sub categories between in Stage 1. But not to get into the technicalities of it, improvement we believe a way that it's judged is patients who have first of all have to have preexisting fibrosis by definition, so at least Stage 1. And to improve you have to improve by a Stage, so we believe that that's what's meant by fibrosis improvement.

As far as blinded adjudication, you're right. This is just as in my answer to the question before on NASH resolution, this is a histopathological assessment. So a pathologist looks at a slide, and based on his or her expert opinion, determines what stage that patient is and whether that patient has probable or definitive NASH or not. That said on the protocol for FLINT was as gold plated as you can get there, there are double-blinded histopathological reads of different histopathologists that had to agree. But anyway good question, I hope I've answered it.

Thank you.

Our next question comes from the line of Akiva Felt of Oppenheimer.

Thanks and congratulations on the data. So Mark, a couple questions. First it's somewhat hard to reconcile of what looks to be very benign lipid data reported today with the NIDDK's focus on safety back in January. Was this something that was misread by the street or was NIDDK looking at a different data set? And second related question, which you may have already answered to Michael, but did you say that there's no longer a CV imbalance overall, not drug related or not drug related, but just an overall CV imbalance? Thanks.

Yes, Akiva, thanks for the question,and obviously to the extent that you were worried about the lipid changes we certainly were that much more. So I can't speak for NIDDK, and as you know, this was a large trial, it was a long trial. There's always a lag in getting up to date data sets and it could be the alarm went off based on earlier trends in lipids perhaps before they plateaued or before at least they started coming back in. So I don't want to second guess that. I think let's focus on the results now seven months later. I think the results speak for themselves and so put to rest the concern at least about outsize magnitude changes or increasing changes over time in worrying lipid parameters.

And then yes, same thing on CV events, I think again with the benefit of further analysis and adjudication potentially that in the end in the final analysis we came out without an imbalance in cardiovascular events.

All right, that's very encouraging, thanks.

Our next question comes from the line of Jim Molloy of Summer Street.

I was wondering, does this much more benign lipid data than it seems before, does that necessitate a lipid study that you guys are planning, are you still planning to start it first half next year, but does it really need it at this juncture?

Jim, thanks. Look, we clearly have an effect on lipids and as I mentioned before, we are absolutely committed to detailed study and understanding of the lipid metabolic effects of our drug. Just because the results came out better than we expected doesn't negate the fact that there was clearly an effect. And we need to do a study to ascertain number one, the mechanisms at play here in a very detailed way. Number two, clinically whether we can in fact with standard of care statin therapy manage the issue effectively over time. And I think that that's something that clinicians are going to want to see from us. So anyway the bottom line is yes, we are going to go ahead with the Phase 2 lipid study, statin study in NASH patients.

Can I ask a quick follow up on that? Knowing that the severity of this disease and the (inaudible) of treatment options right now, any -- probably premature to talk about any chance of earlier than running a full Phase 3 to get the full data set to file this and recognizing you obviously want to run all the data you need to get, but is (inaudible) a way to get a drug that treats a disease that (inaudible) and start giving to people?

Yes, look, the premise of your question I think is correct. This is an epidemic indication, liver disease. As I've said before, NASH just one key stat, NASH is poised to become the leading indication for liver transplant just in the next few years. And I'm talking about overtaking both chronic FC and alcoholic liver disease with no available treatment. Now that said, we continue to guide and I think appropriately that we shouldn't expect to get our drug approved without doing a Phase 3 trial. Our intention is to design a clinical outcomes trial, placebo-controlled clinical outcomes trial in NASH patients.

And again, as was discussed back in September of last year at the FDA hosted NASH endpoints workshop, we do expect as do other companies developing NASH drugs to be able to come to agreement with FDA on a surrogate endpoint that we could nest into the Phase 3 trial and potentially file for accelerated approval on.

And I think again referring to the workshop and now some of you might be aware of the liver forum that has sprouted from that two-day workshop involving all of the stakeholders together, I think it's important to recognize that FDA, and soon I hope EMA, joining in the liver forum taking a real leadership position here. They absolutely recognize the unmet medical need here and are getting out ahead of this.

Thanks for taking the question.

Our next question comes from the line of Alan Carr of Needham.

A couple of them. One of them is it sounds like they're just giving you the manuscript and not the raw data and I wonder how that affects the timing of when you can go over it, come up with some ideas as to what a Phase 3 would look like and discuss that with the FDA. Might that be pushed out a little ways? And then also can you talk a bit more about the impact on metabolic parameters and weight loss and that sort of thing in some of the diabetic things, the glucose as well? Thanks.

Sure, thanks, Alan. Yes you're right, at this point, we have a manuscript now it's a very detailed manuscript as you can see we just summarized top line data from it. And I think that our Head of Regulatory and David Shapiro, our Chief Medical Officer, feel good that based on what's in the manuscript we can go ahead with at least our preliminary planning for Phase 3 and initiate formal discussions with the regulatory authorities with FDA. And now that said, we don't necessarily -- we won't be able to finalize our plans I think without the complete data set and I think NIDDK fully appreciates the fact that we need to get the complete set of data. And we have a plan in place to work with them on getting it to us.

Is that something that you think you can have a pre-Phase 3 meeting in the fourth quarter?

I don't -- Alan, it's just too early to speculate on timing of a regulatory meeting.

Okay that's fine.

Yes, the other -- your question about metabolic parameters, I think you were asking primarily about glucose control and insulin resistance, is that right?

Yes, and also your thoughts on weight loss too, if you can -- to the extent that you can characterize it.

Yes, I mean the weight loss is interesting. We saw that, we weren't expecting it over the six weeks that we previously studied OCA in patients like these. So we're certainly pleased to see it again, it's a modest weight loss but statistically significant compared to placebo. And that certainly is better than the opposite, right which is a concern, a historic concern with the glitazone class of drugs that underwent a lot of study for this indication.

I think that that coupled with the flat HbA1c especially given the patient population is good news, given the obesity and insulin resistance and type 2 diabetes overlap. The HOMA IR that I mentioned is the anomalous finding, it's considered to be a generally good marker of insulin resistance. But there's really a ton of daily -- this is a fasting static measure and there's a ton of daily variability. In fact we just recently read a pretty good paper that shows that any increase of less than 90% from time point to time point cannot really be interpreted as meaningful. And we certainly did not see that.

And as I mentioned, the placebos for whatever reason from the end of the treatment phase 72 weeks, just 24 weeks later had gone through a swing for the worse that was greater in magnitude, certainly than what we saw with OCA. So we're finding that one a little difficult to interpret.

Okay thanks very much.

Our next question comes from the line of Joseph Schwartz of Leerink Partners.

I was wondering if you could give us a sense of your expectation for the timing of the publication, would you expect this to be done concurrent with ASLD or before then perhaps?

Yes, it's a good question Joe but that's not in our hands. It's their manuscript, their publication, we know they intend to submit it, it will undergo peer review. And as you know, process like that can be quick, it can take time, depends on what additional data are requested of them, what journal et cetera. So difficult for me to speculate on that.

I don't want to belabor any points that were already covered and I know you're limited with what you can say and maybe even what you know, but I'm a little bit confused on the seeming removal of and imbalance of adverse cardiovascular events. And I recall that this was seen at an interim analysis at which point the monitoring committee decided to stop dosing patients. Can you step back for us and give us your read on why did they do that, was it not due to the overall risk benefit? Was this just a bad decision, a mistake, those things happen? I don't know, I'm trying to understand what might have happened with regard to their read of the overall risk benefit at the time.

So to be clear, we disclosed a serious cardiovascular event imbalance in our 10-K in March and that was based on what we saw there was a statement in their annual IND update, that -- a typical annual IND update, and there was a comment that had come from the drug safety monitoring committee. We're not entirely sure what data they had in hand at that time, how much adjudication had occurred of the different serious adverse events.

But clearly, the DSMC, which as you know is independent of the investigators, independent of NIDDK in this case, raised on the concern. And the regulatory personnel at NIDDK felt compelled to include that in their update, and we in turn felt compelled to put it out as a materially important disclosure for investors to know. I can't speculate on how -- what happened since, but obviously they had a fair amount of time to look at the complete data set, safety data set, and they determined in the end the number of cardiovascular events and it turned out there wasn't an imbalance.

Okay, great. Thanks very much.

(Operator Instructions)

Our next question comes from the line of Naveep Singh of Goldman Sachs.

Hi, guys, thanks for taking my questions and congrats on the benefit on fibrosis. So I was looking at the 10-Q, and it says that the mean decrease in fibrosis was 0.2 from a baseline of 1.9 in the OCA patients in FLINT and trying to get -- can you put it maybe a little better clinical perspective to us? I think if you look at the PIVENS trial, vitamin E showed an improvement of 0.3 from a baseline of 1.5 but that wasn't statistically significant. So I'm trying to see if the fact that you saw in FLINT is materially better than what we've seen in PIVENS?

And also on the -- if you look at the PIVENS trial, looking at the NAS score improvement, 43% of patients on vitamin E improved versus 19% on placebo. And that data looks very similar to the data in FLINT, so I'm trying to get a better sense on how differentiated OCA is from vitamin E. Thank you.

Yes, and it's a good question and obviously we understand that PIVENS is really the standard out there, the standard trial prior to FLINT and comparisons will be drawn. But as I said in my scripted remarks, the trials are really not apples-to-apples in terms of the trial design, the patients enrolled. So I think it's important to keep in mind that treatment duration in our trial was 25% shorter, 72 weeks versus 96 weeks. That we had about half our patients were type 2 diabetics and if you read the literature, it's very, very clear that the presence of type 2 diabetes means more aggressive and risk of more advanced disease.

Which frankly is collaborated by the fact that speaking specifically of fibrosis, that the means baseline value in the OCA treated group in FLINT was 1.9 as opposed to 1.5 in PIVENS. And while that might not sound like a lot, if you consider that we're talking about a 3 point scale that can only start in terms of presence of fibrosis with a 1 and be bounded on the upper bounds by 3, that's actually a very meaningful difference, right? A significantly more advanced on average disease population with respect to fibrosis. And so who knows how vitamin E or pioglitazone would have done in FLINT. I can't speculate, the two trials are not directly comparable.

But setting that aside, I think it's also important to note that while I truly believe that OCA is an FXR agonist, based on its mechanism of action and its numerous effects in ameliorating liver damage, we believe that our drug that there's a very good thesis and it really is an optimal approach. I would never say that there's going to be one magic bullet in this large heterogeneous population. And as you know there are other companies using other approaches, advancing other therapeutics and just as the case in other large populations of patients, I could foresee a future, a combination approach of therapy of targeted therapies for different sub populations of NASH patients.

And I mentioned this before that we're going to be taking -- looking very carefully at the data and discussing very carefully with FDA and other regulators what the appropriate course forward is. But there's lots of room for different agents, setting aside vitamin E and pioglitazone.

Okay, Mark, a quick follow up to that. In your prepared remarks you said that LDL peaked at 12 weeks. Do you know what it peaked at?

It was consistent with what we observed in our prior six-week study.

Okay, all right that's very helpful. Congrats again.

Thank you.

And, ladies and gentlemen, that concludes our question-and-answer session for today. I'd like to turn the conference back to Mark Pruzanski for closing remarks.

Thank you all for taking the time to listen in and those of you on the webcast, obviously a very exciting day for us and now we're going to get back to work. Thanks, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.