Intercept Pharmaceuticals Inc (ICPT) 2015 Q1 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals' 2015 first-quarter financial results conference call.

(Operator Instructions)

Please be advised that this call is being recorded 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 quarter ended March 31, 2015.

Before we begin, please remember we be may make certain forward-looking statements on today's call, including statements and forecasts relating our future financial and operating performance, anticipated timelines 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 reports filled 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 our updated forward-looking statements, whether as a result of new information, future events or otherwise.

The format 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 is my pleasure to turn the call over to our CEO, Dr. Mark Pruzanski.

Thank you, Senthil. Thanks to everyone for joining us on the conference call and webcast.

I'm going to provide you with a brief 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.

The first four months of 2015 were an extremely busy but exciting time for the Company, and I am very proud of what the Intercept team has accomplished, particularly during a period of significant operational growth in the US and Europe. Key milestones include receiving breakthrough designation for OCA, the successful completion of all supporting studies for the NDA and MAA filings, analysis and presentation of important FLINT data at recent hepatology meetings, and the completion of two successful equity offerings, providing the Company additional capital in excess of $550 million. I look forward to delivering more good news to you as we continue to execute on our plans for this year.

Starting with our the PBC program, I would like to provide the following updates. First, we are on target to complete our regulatory applications, the NDA and MAA, for marketing approval of OCA in the US and Europe this quarter.

Next, Lisa Bright was named Chief Commercial and Corporate Affairs Officer earlier this year, and under her strong leadership, OCA pre-launch activities are well underway, including market research, reimbursement and market access work, as well as building up teams in our core countries to support the launch. We continue to endeavor to attract the best talent across functional areas, as we build up our global infrastructure, with key recent hires in the US and a number of European countries. I look forward to introducing Lisa to you in the coming months.

Finally, the recent EASL meeting in Vienna generated important new insights relevant to enhancing the medical community's understanding of the unmet need in PBC. Presentations from the Global PBC Study Group and UK-PBC Study Group further reinforced alkaline phospatase and bilirubin as a valid surrogate markers, highly predictive of transplant-free survival. Publication of these new data is expected later this year.

Turning to our NASH program, a few the key highlights: a couple recent publications reinforced prior data showing that the development of liver fibrosis is the most important predictor of liver-related clinical outcomes and all-cause mortality. A recent study conducted by the late Dr. Paul Angulo at the Mayo Clinic, that followed over 600 NASH patients for an average of more than 12 years, showed that fibrosis was the sole relevant histopathologic feature predicting adverse clinical outcomes.

Another recent paper by Dr. Quentin Anstee followed a cohort of NAFLD and NASH patients for an average of about six-and-a-half years and showed about 40% of patients in both groups experienced fibrosis progression. Remarkably, more than 40% of the patients with baseline NAFLD developed NASH and a little more than 20% progressed all the way to stage three bridging fibrosis.

Diabetes was the major co-morbid disease associated with fibrosis progression in the NAFL patients. Meanwhile, among those patients with already established NASH at the beginning of the study, approximately 10% with the stage one or stage two fibrosis and 35% of those with bridging fibrosis became cirrhotic in a period of a little more than six years.

We believe that these data provide further support for our approach in targeting reversal of fibrosis, along with other key histopathologic features [this data of] hepatitis as the basis for altering the clinical course of NASH and patient outcomes. We also believe that these findings further underscore the relevance of FDA's designation of OCA as a breakthrough therapy in NASH patients with liver prognosis and the need for effective therapies to address this high unmet medical need.

We are very pleased with our ongoing interactions with both FDA and EMA, as well as the degree of cooperation between both agencies. Per our prior guidance, we are on track to finalize our first Phase 3 program this quarter. So we are looking forward to sharing more information on the Phase 2 trial design with you in the very near future, and will not be providing any additional specifics on today's call beyond what we have previously outlined.

Meanwhile, our belief in the potential for OCA to become an important novel treatment for NASH has grown based on new FLINT data analyses presented at the AASLD Colloquium in March and at EASL this past month. On efficacy side and in the analysis of 80% of the FLINT patients with fibrosis, mirroring our intended Phase 3 study population, we saw consistently greater proportion of OCA-treated patients with reversal of fibrosis by at least one stage, including a substantial subset of patients experiencing complete resolution of fibrosis and otherwise, a significant attenuation of fibrosis progression as compared to placebo.

In fact, in the NASH patients most at risk of progression to adverse outcomes, those with co-morbid diabetes and stage two or stage three bridging fibrosis, close to 50% saw fibrosis improved by at least one stage after just 72 weeks of OCA treatment, as compared to about 20% of placebo patients.

Separately, in an assessment of cardiometabolic parameters in the entire FLINT patient population, OCA treatment resulted in weight loss, as well as significant lowering of systolic blood pressure in patients with hypertension, both clinically important cardiovascular risk factors. While OCA treated patients experienced an increase in LDL cholesterol, patients newly initiating statin therapy in response to such LDL increases, experienced a rapid reversal to levels below baseline and not different from placebo patients newly initiating statins.

These data, along with recent publications and AASLD and EASL guidelines recommending statin therapy in NASH patients, provide support for the thesis that OCA-associated LDL increases may be effectively managed with standard statin therapy. You can find additional details on these scientific presentations on our website or the AASLD or EASL websites.

I will now turn the call over to Barbara to review our financial position.

Thank you, Mark. Good morning, everyone.

Please refer to our press release issued earlier today for a summary of our financial results for the period ended March 31, 2015.

We ended the quarter with $402 million of cash, cash equivalents, investment security available for sale on our balance sheet, or approximately $769 million on a pro forma basis for the $367 million of net proceeds we received from the equity offering we completed in April 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 non-cash items.

While our adjusted operating expenses totaled approximately $31 million in the first quarter, please keep in mind that we expect operating expenses to continue to increase over the course of the year. These expenses will support the clinical development program for OCA in PBC, NASH and PSC, expansion of our clinical, regulatory, medical affairs and commercial infrastructure in the United States, Canada and Europe, expansion of OCA manufacturing activities for not only the preparation of the PBC commercial launch, but also planning to success in NASH, as well as advancement of INT-767 and other pipeline programs.

Adjusted operating expense, as presented above, is a non-GAAP financial measure. We anticipate the stock-based compensation expense will represent the most significant non-cash item that is excluded in adjusted operating expenses as compared to operating expenses under GAAP.

Our detailed financial results are contained in our press release issued this morning. In relation to the $226.6 million warrant revaluation expense recorded in the first quarter of 2014, 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 fair value being included in that loss. The last of the warrants were exercised on a cash less basis in April 2014, so 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 10:5.

(Operator Instructions)

Michael Yee, RBC Capital.

Thanks. Good morning, hey, everybody. Two quick ones. One, you mentioned Lisa Bright preparing everything. Maybe just a big picture, how should we think about what preparations you are doing for this launch? More importantly, once it is approved, how should we think about uptake of that type of drug?

I know it is a little bit far out, but preparing people for how we should be thinking about the uptake, is that a super-fast uptake? Is that a patient uptake? Have you identified where the patients are? Just maybe talk a little bit about your preparations there?

My second quick one was just -- I know you have guided to starting Phase 1 on your second compound, 767. Can you remind us what the differences are there, or what we'd be for? Thanks.

Mike, thanks. With respect to the first question, what Lisa is doing -- and just to remind our listeners this morning, that Lisa was one of the architects of the Sovaldi launch while at Gilead. So she comes with extremely relevant commercial launch experience with respect to OCA's potential and PBC nation and beyond.

What I can tell you this morning is that, with Lisa is leadership, we have been implementing a pre-commercial launch strategy. We have been attracting very good talent to the Company in the US and several European countries, as I mentioned in my prepared remarks. We feel very good about the preparations we are making in advance of launch anticipated next year, assuming that regulatory review goes as planned.

We are not prepared at this time, it is premature, to provide any further guidance with respect to commercial launch and rate of uptake. Stay tuned for that, later on, when I introduce Lisa to you and the rest of investors.

In the meantime, with respect to -- I can go in to a little bit more information about the market opportunity, but that remains unchanged from our prior guidance, with respect to the number of patients out there that we could potentially target with PBC. That number in the major markets remains at 30,000 patients with upside in identifying additional patients overtime who are not yet diagnosed out there.

I guess just more specific -- are you working to identify where the patients are? Have you had early discussions with managed care in terms of you thinking about reimbursement for this orphan type of drug, et cetera, et cetera?

What I can tell you -- I mentioned that the UK-PBC group, and just to let you know. I have said this before. They have over 6,000 living patients just in the UK alone in their database.

So the answer is, yes. We are gaining a better appreciation for where these patients are, who is treating them, et cetera. At this point, we are not prepared to comment further, but suffice it to say that we are doing reimbursement work and we will be able to provide you more detail as the year progresses.

Okay. Yes.

Now, with respect to INT-767 -- thanks for asking the question. We continue to guide that we will have this compound into the clinic by year end.

You asked about the difference from OCA. What I would say is that it is a threefold more -- it is also a bile acid derived compound. It is three-fold more potent as an FXR agonist. Also has TGR5, the second biologic receptor activity.

And head-to-head, against OCA in every single animal model across chronic liver disease, GI intestinal disease and renal disease, it performs better than OCA. So we are very about excited about INT-767, and intend for it to be our next compound into the clinic.

Okay, thanks.

Alethia Young, Deutsche Bank.

Thanks for taking my questions, two. One, I just want to know how you think clinicians and regulators are weighing the benefits of cardiovascular risk versus improving fibrosis? And then I will ask a quick question after that.

Sure. As you know, cardiovascular morbidity/mortality is the leading issue in this population, so of course, cardiovascular safety for any drug is important. But there are many ways -- as I mentioned on the call, we recently put out this statin sub group data from FLINT.

I think that there is a general and growing appreciation out there -- number one, that NASH patients should be on statins, most if not all, should be on statins. That is per both AASLD and EASL guidelines.

There is a clear understanding, based on literature and also reproduced in our FLINT data, that statins can be safely used in patients with liver disease and with NASH and improve cardiovascular outcomes, also, true to the additive when used with OCA in lowering liver enzymes. So, there is a very clear thesis for using statins in this populations to manage cardiovascular risk. As you know, there are other agents already available on the market or coming to the market come soon.

In the meantime, there are no therapies to treat NASH, which as you know, Alethia, has overtaken alcoholic liver disease to become the second leading indication for transplant. In the next few years, will overtake hepatitis C to become the leading indication of transplant.

There is a tremendous unmet need here. As I mentioned on the call, there is growing evidence for the pivotal role of fibrosis, as the histopathologic feature to monitor and to treat in this patient population. It is just alarming to see in a cohort of NAFLD patients, these are, theoretically, patients without stead of hepatitis, without NASH, at baseline progress so quickly to NASH and develop fibrosis and in a period of just over six years go from zero to bridging fibrosis to stage just before cirrhosis.

Alethia, it is Rachel. I just want to add onto just a couple of comments on what Mark said. Keep in mind, in addition to the statin work that he mentioned, that OCA is also associated with weight reduction and blood pressure reduction in hypertensive patients based on sub-analyses and analyses coming out of FLINT. So, when you tie everything together, you've got some positive cardiometabolic effects induced by OCA on weight loss and blood pressure.

Then on the other side, with the LDL increase, as Mark mentioned, we believe that this can be effectively treated with statin. Overall, we remain very optimistic on the overall picture of OCA's effects on the cardiometabolic profile.

Thanks for that, that was very helpful. Then, the next question. Do think that FDA is going to hold all of these NASH drugs to the same standards as far as end point? Or is it going to be balanced between safety and endpoints -- just what's your general flavor there?

It is a good question. Obviously, there is no current precedent for regulatory pathway in this disease. As I mentioned, we're very pleased with our progress with FDA and EMA in defining the Phase 3 registration program and will soon come back to you with details on the design of the Phase 3.

I can't speak for FDA or EMA, so I can't answer that question. I don't know if there will be different potentially usable endpoints in different subpopulations of NASH patients.

What I can say is, that we are working with FDA closely in the context of defining a path in the breakthrough designated population, those patients with fibrosis. We think that -- in any case, I keep talking about fibrosis, but I do think that's the most important feature here that we are addressing along with other key histopathologic NASH features and with the FLINT data showed, for the first time, the ability to reverse fibrosis in a relatively short period of time.

Therefore, frankly, feel that we have raised the bar on the field. We can only speak for our program and what we think OCA can do and showcase in Phase 3.

Great. Thanks for the update.

Yaron Werber, Citi.

Great. Thanks for taking my question. I have just a couple of questions. The first one is, when you think about, Mark, I think you've talked in the past about potentially looking for some surrogate markers be it biochemical and even more importantly radiological, to try to move -- I don't want to call it move way, but try to shorten time to an endpoint in NASH, away from fibrosis. Can you give us a little bit of a sense what your thinking about and when that study is going to start?

Secondly, -- and it is sort of for the group, and obviously, definitely for Mark. Some pills going to move to BD a little bit, it looks like you guys are thinking about combination approach or even bringing in more compounds. How would that work? Would that work in compound with OCA? Or is that going to -- because at the same time, your moving to 767. Thank you.

Thanks, Yaron. Yes, I think we have said -- and other companies pursuing NASH have said that we simply have to move away from biopsy overtime, both for diagnosis and for staging patients, and frankly, in the context of developing new therapies to treat this disease. This is a view shared not just by us, but all relevant stakeholders, including regulatory agencies. So there is a lot of support out there for doing this. Unfortunately, we don't have one yet or some kind of composite.

We are, in the Phase 3, going to be investigating other noninvasive modalities, including imaging and biomarkers, potentially even so-called functional tests, quantitative functional liver tests, in an effort to correlate with histology, with biopsy such that eventually we can move away.

You alluded to additional study beyond the Phase 3. I will take the opportunity to say that, as I have said before, that the pre-cirrhotic Phase 3 study we're planning is the first focus, but we will be following up with additional studies.

We have talked about the standalone Phase 2 lipid study we intend to start a little later this year. We also have said that we're going to be starting a cirrhosis study. It's just a question of when, not if. It is too premature now to give guidance on when we start that study.

There are potentially other studies to facilitate a shortening of the lifecycle here of drug development in NASH. All again, with a primary goal -- or one of the goals being, identifying noninvasive modalities, to get rid of biopsy.

With respect to your second question, in BD, we are not going to comment right now on BD activity. I will say that this is a huge heterogeneous disease.

We do think that, over time, while we feel absolutely that OCA, as an FXR agonist, is the optimal approach currently in the clinic and development, but we believe that this disease will lend itself to multiple different approaches, mechanistically, over time. I wouldn't be surprised to see a combination regimens evolve. That is certainly something that we are interested in looking into.

And Rachel, will say a couple things.

I think you summarized most of what I wanted to say. The only other thing I would emphasize here, Yaron, is that we think that the effects that we're seeing with OCA are really differentiated. We have got statistically significant improvements in fibrosis at only 72 weeks, and we are hopeful that will improve with time. Obviously, we need to show that in larger and longer studies.

Then, certainly, to Marks point and your point about combination, this is a very heterogeneous disease, a lot is not really known between genetics and just all the different facets of the disease. It makes sense that over a long period of time, you'd want to develop, not just OCA but a combination regimen.

Matt Roden, UBS.

Great. Thanks very much for having me on the call. Based on your comments over the past several weeks or months, it seems that you have a pretty clear picture of what your Phase 3 program is going to look like in NASH. I know you said you didn't want to talk about it specifically, but I have sort of a different twist on the question.

I infer, based on your comments, that what you have said is based on the regulatory interaction. Can you talk about gating factors for getting that up and running? You have been consistent in saying that can happen this quarter.

Would it be wrong to infer that the protocol is basically agreed, but it's simply a matter of just waiting for formal written minutes from the FDA, to formally announce? Just trying to understand what you said and what the basis of the confidence is in the next steps and in the protocol that you've talked about?

Matt, thanks for the question. I appreciate the interest in this. What I will say is what I've said before. This is a huge precedent-setting program in NASH.

It is a breakthrough within FDA, meaning that it has been elevated to the attention of senior leadership at CDER, who have been involved. It is a large complex program. Recall that what I have said in the past is what we are hoping to do here is a placebo-controlled outcomes trial with a nested interim analysis, at the same time point as FLINT to readout on for accelerated approval.

There is a lot of ground to cover with the agencies. There are, for a program like this, multiple interactions, ongoing interactions. Very happy with those interactions. And like I alluded to on the call, we are still on track to complete discussions necessary to finalize the program this quarter. We do intend to come back to you at that point with the relevant details of the design.

Okay. Secondly, a kind of related question to Yaron's, you are pretty well capitalized at this point. So does the state of the balance sheet, in any way, relieve capital constraints for either internal or external R&D?

So, what is the right expectation for additional pipeline opportunity for you guys? And to what extent of the capital situation change that?

Well, we are very happy with our balance sheet right now. We do have ample additional capital available to execute on our plans, starting of course with the launch of OCA and PBC, but as Barbara mentioned, a number of other activities, including the development of our pipeline. Beyond 767, we are very interested in additional opportunities to develop the pipeline.

Okay. Thanks for taking the questions.

Ian Somaiya, Nomura Securities.

I just had two quick questions. One, I know we are shifting our focus to the Phase 3 trials and the design of the trials. I was hoping you could just maybe help set expectations for the remaining Phase 2 study in NASH, the Japanese study? How should we think about the data, and what do you hope to learn from that trial?

The second question was, if you could just comment on the role of FXR in hepatitis B and your plans to pursue that?

The SDP is our partner in Asia. They are conducting a 200 patients NASH study. It's expected to readout prior to year end.

This is not in anyway a gating for our Phase 2 trial. It is a Phase 2 trial, as is FLINT, and therefore supportive but not pivotal.

What distinguishes it from the FLINT trial is that it included three doses, 10, 20 and 40 mg, once a day of OCA. One thing that we are interested in seeing is whether there was any kind of dose effect, both on histology, potentially, and also on other markers, biomarkers and lipids, for example.

Again, this is supportive. Keep in mind, that at 200 patients with four arms, there are only 50 patients per arm. This is not powered on fibrosis as, frankly, wasn't FLINT, but significantly smaller sample sizes that we're talking about here, so purely supportive.

The other thing I would add is that, even though there is a dose ranging study, as Mark said, we are not looking for this to inform Phase 3. As you know, the Japanese population is a very distinct population. Even though there are some similarities and many similarities between Western NASH and Japanese NASH, it is important to recognize that the BMI of a Japanese NASH population is substantially lower.

It is unclear whether the doses and the effects that are seen in the SDP trial would be actually translatable to a Caucasian population. So, I just want to throw that out there and mentioned that dosing in Japanese, across the pharmaceutical industry, is typically lower than in Caucasians.

Whatever you learn for 20 mg, for example, might not be translatable to doses that we're planning on using. While it will, as Mark said, help us understand whether there are dosing effects, it might not be translatable.

Then very quickly, Ian, your question about hepatitis B. I think what you are alluding to is that there is rationale out there and potential interest out there in FXR agonist treatment in hep B.

We are evaluating a number of potential additional indications to the ones that we are currently pursuing. But, it is premature now to comment on whether or not we will pursue hepatitis B.

Great. Thank you very much for taking my questions.

Ritu Baral, Cowen and Company.

Hi, guys. Thanks for taking the question. Any new thoughts on your NASH lipid study trial design? Have there been any new understanding or new findings around the FXR mechanism as it relates to LDL?

Hey, Ritu, it's Rachel. No, really, no change in our thinking there. I think we have given some initial broad stroke commentary on this.

Really, the Phase 3 program has taken up the bulk of our time and focus. That is really why the lipid study is something that has been, still a very important priority, but because it is not dating for Phase 3, it is just a study that's starting a little bit later this year.

What we have talked about in the past is doing several different doses of OCA and also doing some different titration work with statins. So, if this study should give us a very clear understanding of the effect of OCA on lipids, both from a dosing effect as well as from the ability of statins to mitigate LDL increases, we will also be looking at lipids sub fractions in that study. That is no change from our thinking, previously.

Understood. A quick follow up. Your Phase 2 PSC study that is due to start, any updates there? Any additional details on trial design there?

Thanks, Ritu. We initiated primary sclerosing cholangitis Phase 2 in December. That is currently enrolling. Premature at this point to give any guidance on when we would expect it to readout, but this is a very important indication for us.

Great. Thanks for taking the questions.

Thank you, and that does conclude our question-and-answer session. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.