Intercept Pharmaceuticals Inc (ICPT) 2014 Q4 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals 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.

Good morning and thank you for joining us on today's call. We are reporting on financial results for the year ended December 31, 2014 and will also be providing an update on our development programs.

Before we begin please remember we'll be making certain forward-looking statements on today's call including statements and forecasts regarding our future financial and operating performance, anticipated timelines for the potential approval and commercial launch of a betacholic 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 reports filed with the SEC including the risk factors section of our most recent annual report on Form 10-K and in Intercept's other filings with the SEC. 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 our CEO Dr. Mark Pruzanski.

Thanks Senthil and thanks everyone for joining us on our conference call and webcast. 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 position.

Let me start off by saying that we are very excited about the progress we made in 2014. It was an important year for our PBC program with positive Phase 3 data from the POISE trial in March, FDA granting us fast-track status in May, the global PBC study group publication supporting our surrogate endpoint in December and really productive discussions with the regulators throughout the year that culminated in the successful pre-NDA meeting with FDA.

This set the stage prior to year-end for the initiation of our Phase 3b confirmatory clinical outcomes trial in PBC and starting our rolling NDA submission under the accelerated approval pathway. Both of these important milestones and our goal to bring OCA to market is the first novel treatment alternative in almost 20 years for PBC patients with inadequately controlled disease.

We continue to look to 2016 as our US and European launch year. To that end you may have seen we recently announced the appointment of Lisa Bright as Chief Commercial and Corporate Affairs Officer. Lisa brings more than 25 years of industry experience and most recently comes from Gilead where she led the Sovaldi launch in Europe for hepatitis C.

We're excited to have Lisa take on this role and are already seeing a positive impact from the business as we prepare for our anticipated commercial launch in PBC and lay the foundation for NASH and other indications. Of course speaking of NASH, 2014 was also a transformative year for OCA and the Company as a whole based on the earlier than expected readout of the FLINT trial conducted by the NIDDK at the National Institutes of Health. Their publication of the FLINT trial results in November was followed by the timely transfer to us of their IND which allowed us to quickly move to apply for breakthrough designation in December.

We also received the comprehensive FLINT data sets which allowed us to do a very detailed subgroup analysis of the trial results helping us gain a better understanding of OCA's safety and efficacy profile in the NASH population study while better informing the design of our upcoming Phase 3 program. Our accomplishments last year have laid the foundation for a very exciting year ahead for the Company in which we continue to work hard at establishing Intercept as the leader addressing the huge unmet need of many millions of patients worldwide with neglected chronic liver diseases.

Looking ahead in our PBC program we're on target to complete our filings for marketing approval for OCA in the US and Europe in the second quarter. In addition this year we will be completing our transition from a development stage to fully integrated commercial Company with a plan to be ready to launch OCA in the US and key European countries next year.

To this end we're building up a global medical affairs team and continue to expand our commercial infrastructure in the US and Europe. We're also investing in our drug supply chain to support both the PBC launch and the much greater supply needs projected for planned OCA label expansions for the treatment of NASH with fibrosis and other indications.

Turning to our NASH program we were thrilled that after review of the safety and efficacy data from our initial six-week Phase 2 trial in diabetic fatty liver patients and the 72-week Phase 2b FLINT NASH trial, FDA designated OCA as a breakthrough therapy in NASH with liver fibrosis. This designation underscores FDA's recognition of the urgent need to bring novel treatments to NASH patients who have developed liver fibrosis, a population estimated at more than 14 million people in the US alone that is expected to make this serious disease the leading cause for liver transplant in just the next few years.

We are grateful for FDA's strong interest in advancing novel therapies for this disease and the additional momentum it gives us as we work on finalizing our Phase 3 program. We continue to project getting to a final Phase 3 protocol in the second quarter this year pending our reaching consensus on this global program with regulators in both the US and Europe.

Another important development is that two abstracts we recently submitted have been accepted for presentation on March 20 at the AASLD colloquium in North Carolina. Both abstracts are new subgroup analyses of the FLINT trial data we performed following receipt of the full data sets last year and provide important new insights on the efficacy and safety of OCA in NASH patients. One abstract is focused on the histologic improvements associated with OCA treatment in the designated breakthrough population of NASH patients with fibrosis who are at higher risk of progression to cirrhosis.

The second is focused on the impact of OCA on key cardiometabolic safety parameters and provides subgroup analyses showing the impact on LDL-cholesterol with concomitant statin use in patients receiving OCA. We're excited to share these new data with the medical community since these important analyses were not included in the original Lancet publication.

Additionally we will host an Analyst Event at the colloquium on the evening of March 20 to give analysts and investors the opportunity to discuss the detailed results with us. After we have the Phase 3 NASH trial underway we plan to start a separate Phase 2 NASH lipid trial later this year. The goals of this trial are to characterize the lipid metabolic effects of OCA and to carefully assess the ability of statins to manage the LDL-cholesterol change observed with OCA treatment in the NASH population.

Finally we expect results from the Japanese Phase 2 NASH trial being conducted by our partner Sumitomo Dainippon by the end of this year. As a reminder this is a 200 patient trial similar in design to FLINT but assessing three doses of OCA, 10, 20 and 40 milligrams daily versus placebo in Japanese NASH patients.

Of course we intend to fully elucidate and explore OCA's potential as a novel FXR agonist by pursuing an additional set of priority chronic liver disease indications beyond PBC and NASH. So in addition to an international Phase 2 trial in patients with PSC, primary sclerosing cholangitis, that is currently enrolling later this year we plan to initiate a Phase 2 trial in biliary atresia, a very rare but devastating pediatric cholestatic liver disease.

Looking even further ahead we also intend to collaborate closely with the hepatology community to design and conduct trials of OCA in other indications where there is great unmet need.

With that I'd like to close my prepared remarks with our key corporate objectives for this year which are one, setting the stage for a successful PBC launch; two, advancing our pivotal Phase 3 NASH program; three, developing our product pipeline; and four, continuing to attract the best talent as we build our infrastructure in the US and Europe to support the continued progress. I want to thank the entire Intercept team including all of our employees, the physicians and patients participating in our trials worldwide, consultants and vendors we work with and of course our investors who make our work possible, for their collective dedication and support during this transformational period for the Company.

Thank you. And Barbara, I'll hand over to you.

Thanks Mark. Good morning everyone. Please refer to our press release issued earlier today for a summary of our financial results for the period ended December 31, 2014.

We ended the year with $240 million of cash, cash equivalents and investment securities available for sale on our balance sheet or approximately $431 million on a pro forma basis for the $191 million of net proceeds we received from the equity offering we completed in February, 2015. For the full-year 2015, we reiterate our adjusted operating expense guidance in the range of $180 million to $200 million which excludes stock-based compensation and other noncash items.

These expenses will support the clinical development program for OCA and PBC, NASH and PSC, expansion of our clinical, regulatory, medical affairs and commercial infrastructure in the United States and Europe, expansion of OCA manufacturing activities for not only the preparation of the PBC commercial launch but also planning for success in NASH as well as advancement of INT-767 and other preclinical pipeline programs. Adjusted operating expense as presented above is a non-GAAP financial measure. We anticipate that stock-based compensation expense will represent the most significant noncash item that is excluded in adjusted operating expenses as compared to operating expense under GAAP.

Therefore our current cash resources are adequate to not only fund us through the important milestones in 2015 that Mark just highlighted but sets us up for our anticipated 2016 PBC launch.

Our detailed financial results are contained in our press release issued this morning. Our 2014 non-GAAP adjusted operating expense was approximately $92 million. This amount excludes the noncash warrant revaluation expense of $171 million and noncash stock-based compensation expense of $20 million.

In relation to the warrant revaluation expense recall that in connection with some of our pre-IPO equity financing we issued warrants that were classified as liabilities and were adjusted to fair value on a quarterly basis with the change in the fair value being included in net income or loss. This amount including our $283 million, 2014 net loss was a noncash item as Intercept was not required to expend any cash to settle the warrant liability. The last of the warrants were exercised on a cashless basis in April 2014 but there were no such expenses after that time.

Let me now turn the call back over to the operator to open the line for questions. We will have to keep the Q&A brief as we have a hard stop today at 9 AM.

(Operator Instructions) Michael Yee, RBC Capital Markets.

Can you hear me okay?

Yes.

Okay, great. Just two quick ones. One was can you give us a quick update on the PBC filing, your two studies that you had to finish to complete the necessary steps to complete the filing, how you guys feel about that and where the status is on that? And secondly can you just confirm that you're well into conversations both in Europe and US with the Phase 3 design?

What would be the one or two last things you're trying to figure out with regulators before we are green lights on Phase 3? Thanks.

Thanks for the question, Mike. So with respect to the PBC Phase 1, just to remind everybody last year we let everyone know that we'd been asked by the regulators to do these two additional Phase 1s, a biocomparability study and an ADME [greater] label ADME study. Both of those studies, in fact, all clinical and nonclinical supporting studies for the NDA and MAA have now been completed on schedule.

No news is good news. And right now it's just a question of continuing to execute on the completion of those filings in the second quarter as I mentioned in my prepared remarks.

With respect to the NASH Phase 3 we are in an active dialogue right now with the regulators. Of course the breakthrough designation really helped elevate this program within FDA.

And so the interactions are very constructive and ongoing. And we as I mentioned are guiding to completion of the final protocol for the Phase 3 program pursuant to discussions with regulators in both the US and Europe in the second quarter and then we're going to hit the ground running with the program.

Okay, perfect. Thank you so much.

Alethia Young, Deutsche Bank.

Hi, this is Ellie on for Alethia. Thanks for taking our questions. So as you guys have had more time to analyze the FLINT data in-house how are the details helping to inform the NASH statin study design?

I'm actually going to ask Rachel McMinn, our Chief Business and Strategy Officer sitting beside me to take that question.

Yes, it's a good question. At this point we haven't released data from the FLINT subanalyses or gone into many specifics on the statin design. So I think it's probably better to have a more robust discussion on that topic on or after March 20 when the data come out but as Mark said we're excited to present these data and feel good about the overall profile of OCA.

Okay, thanks. And just a quick follow-up.

How do you think the FDA and the EMA are going to go about formalizing a definition for NASH resolution or clearance? Do you think there will be different definitions that will be applied across the different NASH assets that come along?

Well you raise a very good point which is that there is no standardized definition right now from a pathologic standpoint of what NASH resolution looks like or needs to look like on a slide. And as you know it was defined differently in FLINT by the NASH CRN as compared to let's say Genfit with its upcoming data set.

FDA is well aware of this and we are a part of our active discussion right now is exactly that, how exactly should NASH resolution be defined. With respect to your question about it being different, it's too early to tell but I can tell you that there will be one standard definition we believe that will be set as a precedent and apply to all companies that are pursuing this indication going forward.

Okay, great. That's helpful. Thanks.

Akiva Felt, Oppenheimer.

Hi, good morning. Thanks for taking the questions.

I was just wondering if the new subgroup analyses that are coming at the AASLD colloquium, were these shared with FDA as part of the breakthrough therapy designation application? And also do you have additional FLINT subgroup analyses beyond the two that you're going to present in March at the EASL conference? Thanks.

Thanks, Akiva. So the answer to your first question is no. FDA reviewed exactly what is available right now to you in reading The Lancet publication and so the answer is no.

Second with respect to EASL and frankly AASLD what we have said before is that these two meetings of course are meetings that we would be interested in targeting this year for dissemination of additional subgroup analyses but it's premature to comment on what's going to show up at those meetings. We're excited as I mentioned in my remarks about the two abstracts being accepted at the colloquium. They are currently under embargo but I hope that you can make it on the 20th and see what we have to share there.

Thank you, Mark.

And just one final point. I should say that those abstracts are based on subgroup analyses that we've done and you had also asked, yes, we have done additional subgroup analyses. There's a lot of data there to mine.

Ian Somaiya, Nomura.

Hi, good morning everyone. Thank you, it's Matthew on for Ian.

Just quickly if I may, I just was wondering if you might be able to give us some thoughts about at least how you're thinking around both cholesterol management strategy in the upcoming Phase 3 as well as I think you've alluded to at different points potentially dose adjustments to help with pruritus and I was just wondering if you could maybe get some color on your thinking on that one as well. Thank you.

Yes, sure. You know first thing with respect to cholesterol management in Phase 3 is that we will do it. It was not something that was done in FLINT, it was not anticipated in FLINT and as you know there was an adjustment midcourse where actually primary care was advised to pay attention to cholesterol changes and that resulted in some patients being managed but certainly not all.

So I'm not going to get in to the details of how we're going to do it. But frankly as you probably know most if not all of these NASH patients under current US guidelines at least ought to be on a statin to manage their dyslipidemia. And the literature clearly supports the fact that statin use improves outcomes, cardiovascular outcomes and also lowers liver enzymes in these patients.

So statins really are indicated for use in this population and we expect, as I've said many times before, we expect to be able to show that appropriate statin use will be able to manage the cholesterol effects of OCA in a large number of these patients. With respect to the second part of your question, dose adjustment to manage pruritus, yes, we used a lower dose and titration in our Phase 3 PBC trial to great effect in showing that pruritus is clearly dose-dependent and can be managed in that manner.

As I said before we intend to study not just the 25 milligram dose that has been shown to be effective in FLINT but also a lower 10 milligram dose in Phase 3. And our hypothesis going in is that we will be able to show better management of pruritus.

I'd just like to add just one other point of detail in case you haven't seen the PBC Phase 2 publication in gastroenterology. And let me just talk you through a little bit of the data and then I'll come back with a conclusion.

But in that Phase 2 study 10 migs was as effective as 25 and 50 migs. So no improvement in efficacy but there was a dose-dependent increase in pruritus. Because of that data that led the team to then use 10 migs as the highest dose in PBC and actually investigate a 5 and 10 mig titration group and about half of the patients in the Phase 3 POISE program were well -- met the primary endpoint on 5 migs alone. So that's to give you the stage for PBC.

Now the dosing in NASH is obviously different. The first dose that was tested was 25 mig. There's not been any dose exploration and we can't say with confidence that lower doses would work.

But at least gives you a sense of what we saw in PBC and that there is some rationale to expect a lower pruritus rate with lower dosing. And obviously efficacy would need to be established in the Phase 3 setting.

Okay, thank you very much.

Ying Huang, Bank of America.

Good morning, thanks for taking my question as well. So first of all, Mark, can you tell us when you're going to have the end of Phase 2 meeting? And also do you think FDA wants to see not worsening of the fibrosis or actually potentially a reversal of fibrosis as the endpoint in Phase 3 or part of the endpoint?

Then secondly I'm curious about your thought on the competitive landscape in NASH? Because we knew that Gilead recently bought by program from a German company called Phenex and then Merck also signed a collaboration with NGM.

So I was wondering where the competitive strength you have and what do you think this will involve? Thank you.

Thanks for the question, and I guess the first part of the question with respect to, yes so we don't as you know we don't comment on any specific meeting with FDA. With a program of this scope and size there are multiple interactions with the agency.

As you know we got breakthrough designation and part of breakthrough designation is type B meeting. But again we have multiple interactions and suffice it to say that we have reiterated our guidance now that we expect to get to final protocol in the second quarter of this year.

With respect to fibrosis and no worsening which was mentioned in the Hepatology publication on the proceedings of the 2013 endpoints workshop as I've been saying before based on the result in FLINT we've raised the bar out there. And FDA has now very specifically designated the breakthrough population as NASH patients with fibrosis. And that reflects a recognition by FDA that it's fibrosis that by far and away correlates with bad outcomes, both liver and non-liver related outcomes, and is the important feature of NASH to focus on.

So we've often said that we intend in Phase 3 to showcase the anti-fibrotic benefit of OCA as well as the benefit on improvement in other features of steatohepatitis. So it's premature to really talk about what specifically the endpoint is going to be but I think you can read the tea leaves in FDA's designation for what FDA is going to want to see from future therapies, at least in the breakthrough population.

With respect to the competitive landscape you're right, there has been activity. You've mentioned Gilead first and frankly first point there is that this represents additional validation of FXR as a target. Of course their program is a non-bile acid program and pretty early preclinical so we'll just have to watch and wait over time to see how they advance that program.

There are of course other drugs out there, other mechanisms, you mentioned NGM, there's also Genfit and others. And frankly from our standpoint if you think about this this is such an enormous disease population, such a heterogeneous disease that just as has been the case in other analogous diseases over time you see multiple different approaches, different mechanisms with drugs that find very important places in the armamentarium of treatment including eventual regimens that emerge in harder to treat subpopulations of patients. We predict that the same will occur in NASH while at the same time two important points about our program.

First we're in the lead and we intend to maintain the lead. Second OCA is a first-in-class FXR agonist and is as promising as other approaches appear to be time will tell with Phase 2 data. We believe that as an FXR agonist we really have an optimal approach to treat NASH patients with fibrosis.

Thanks.

Alan Carr, Needham.

Hi, thanks for taking my questions. I guess can you comment quickly on alignment between EMA and FDA and then also can you -- in terms of NASH.

And then also can you comment on the status of the PSC trial that you just started and then any updates on 767. Thanks.

Thanks, Alan. Yes, with respect to the first part of your question, alignment between EMA and FDA, what I can tell you is that the momentum generated by the NASH endpoints workshop in 2013 hosted by FDA resulted in the formation of something called the liver forum which is a formal gathering that includes EMA and of course industry sponsors pursuing NASH and academic thought leaders. And the kickoff meeting for that was at AASLD this past November.

EMA was represented there. So there is alignment inasmuch as the regulators are thinking together about registration paths in this disease population. And clearly there's interest just as there's interest on the part of FDA, there's clearly interest on the part of EMA in the disease and the unmet need and advancing therapeutics.

With respect to PSC and 767, so we just initiated the PSC study in December this past year. It's too early to comment on enrollment. This is going to be -- this is an international study.

We're targeting enrollment of 75 patients and we'll give you an update later on as the trial ramps up. 767, our guidance, thanks for reminding me, I didn't reiterate it, but our guidance is that we will be getting 767 into Phase 1 by year-end this year. We continue to be very excited about this compound.

Just to remind everybody this is approximately threefold more potent on FXR than OCA. And in every single animal model of fibrosis and chronic disease in liver, intestine and kidney 767 has looked superior to OCA head to head. So that, hence our excitement.

Thanks very much.

Jim Molloy, Summer Street.

Hey guys, thanks for taking my question. Just a quick follow-up.

This breakthrough designation that you got, how does that, how does it change your interactions so far? And does that impact the Japan data and the ability to maybe use that in a US filing in any way?

I think you ask that each time, Jim. Look, the breakthrough I think it's obviously tremendously exciting for us. I think it was also very exciting for the gastroenterology division and within FDA generally.

As far as we know this is the largest ever population designated breakthrough and of course there's an unprecedented regulatory path here. So the program has been elevated internally to senior leadership involvement in FDA, which is typical in a breakthrough designation.

It certainly means that as good and constructive as our interaction and working relationship has been with the GI division it elevates it that much more with really very frequent interactions with the division. And just to remind you, this is the same division, exact same people reviewing our PBC program. So they know us as well as they know OCA at this point, quite well as well.

So with respect to the Japanese data, thanks for reminding me, this is SBT's data expected around year-end. The answer is no, Jim, the breakthrough designation doesn't change our expectation of first of all of course needing to do the Phase 3 but second and more importantly the fact that the first opportunity for getting this drug approved and the label expanded for NASH patients with fibrosis will be based on results from interim results from this Phase 3 program.

I think it's appropriate to view FLINT and the Japanese trial as important but supportive Phase 2 studies. And it will be interesting to see for example what impact if any there is from the different doses to see if there is a dose ranging effect in the Japanese data because of the 10, 20, 40 milligram dose selection.

Great, thanks for taking the question.

Thanks everybody again for listening today. We appreciate your support. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference.

You may now disconnect. Good day.