Intercept Pharmaceuticals Inc (ICPT) 2015 Q3 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals' 2015 third-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, Dr. Mark Vignola, Intercept's Director of Investor Relation. Please go ahead, sir.

Good morning, and thank you for joining us on today's call. We are reporting our financial results for the quarter ended September 30, 2015. Before we begin, please remember we will be making certain forward-looking statements on today's call, including statements and forecasts regarding our future, financial and operating performance, anticipated time lines for the potential approval and commercial launch of obeticholic acid, and our regulatory, clinical and commercial plans, goals, and estimates, as well as other statements which relate to future events.

The 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 sections 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 is my pleasure to call over to our CEO, Dr. Mark Pruzanski.

Thank you, Mark, and thanks to everyone for joining us on our conference call and webcast. I am going to provide you with an update on the development of our lead product candidate, obeticholic acid or OCA. Lisa Bright, our Chief Commercial and Corporate Affairs Officer will provide an update on our commercial preparations. Barbara Duncan, our Chief Financial Officer, will then discuss our financial results and cash position.

2015 continues to be a year of execution for Intercept. And over the last few months we've had key developments, in not only our development program for OCA, but also in our evolution towards a fully integrated commercial entity. Starting with our PBC program, I would like to provide the following updates. First, I'm excited to announce that based on the strong patient efficacy and with the support of PBC thought leaders, a number of official hepatology bodies including the American Association for the Study of the Liver Diseases, AASLD, and the European Association for the Study of the Liver, EASL, recently formally endorsed changing the name of Primary Biliary Cirrhosis to Primary Biliary Cholangitis, still known by the acronym PBC. We actively supported the effort to rename the disease and believe the change will help patients with this autoimmune liver disease ease the stigma often associated with the term cirrhosis.

In August, we announced that the FDA granted priority review for OCA into PBC, with a PDUFA date of February 29, 2016. We are pleased that the FDA has been very engaged with us in the review process, and we continue to expect in our preparing for an advisory committee meeting early next year, keep in mind that, OCA if approved will be first new medicine for PBC in 20 years.

We are also continuing our regulatory process in Europe, and continue to plan for approval and launch in the second half of 2016. As we move towards potential OCA regulatory approvals in 2016, we continue to make great strides in building up our commercial infrastructure to support global product launches, which Lisa will update you on in a minute. I am also excited to announce that we will be hosting an Analyst and Investor Day in New York City on December 1, 2015, to provide a more in-depth review of our commercial strategy.

Now turning to our NASH program. In September, we announced the initiation of our Phase 3 REGENERATE trial. This is the first Phase 3 registrational trial in non-cirrhotic NASH patients with advanced fibrosis, a serious chronic liver disease with no advanced therapies. The FDA designated OCA as a breakthrough therapy in this patient population earlier this year, and coordinating with the EMA, helped us to find a regulatory path toward eventual approval for this indication.

REGENERATE will give very robust trial with two key objectives First, to support accelerated approval based on an interim histology analysis at 72 weeks, and second, to provide liver-related outcomes data on a post marketing basis to confirm the clinical benefit of long-term OCA treatment. As we've stated before, for the 72-week interim analysis we are targeting enrollment with 1,400 biopsy proven NASH patients with stage 2 and 3 liver fibrosis. In addition, to the 1,400 patients supporting our regulatory filings for initial marketing approval, we are targeting enrollment of approximately 600 more patients to support the outcomes phase of the trial. We will continue to follow the entire 2,000 patient study population through the clinical outcomes on the post marketing basis for confirmation of clinical benefits in order to support full approval of the drug.

We also recently announced top line results from a Phase 2 trial of OCA in Japanese NASH patients, conducted by our collaborator, Sumitomo Dainippon Pharma. We reviewed these results in the conference call that is archived on our website. This is the first trial of OCA in a Japanese NASH national study population that had different characteristics from the Western NASH patients we've been testing OCA in, and we are looking forward to continuing to analyze the data with Sumitomo Dainippon Pharma

Developing a broad and comprehensive NASH clinical program remains a key focus for us. Prior to year end, we are planning to initiate a Phase 2 NASH trial titled, Combination of OCA and statins for monitoring of lipids for the control trial. And we are also moving forward on plans for a NASH cirrhosis trial. We look forward to telling you more about these and our other plans in the NASH program, at our Analyst event being held during the upcoming AASLD meeting on Monday, November 16.

With regard to our other clinical development programs with OCA, today we announced that our Phase 2 biliary atresia trial started in October. Biliary atresia is a very rare, but devastating pediatric cholestatic liver disease, for which there are no approved treatments. In addition to studying the effects of OCA treatment in biliary atresia, the trial is a part of the approved pediatric investigational plan in support of the MAA for OCA in PBC in the European Union.

This milestone represents our commitment to bringing new medicines to patients with chronic underserved liver diseases. Our primary sclerosing cholangitis or PSC Phase 2 trial, the AESOP trial, continues to enroll patients, and we have doubled the number of sites participating, to increase the speed of enrollment. Beyond OCA we are reaffirming our plan to advance our next pipeline candidate, INT-767 into the clinic by year end. This is a three-fold more potent FXR agonist in OCA, and we look forward to further evaluating this compound's safety and pharmacokinetic profile.

Finally, I wanted to touch briefly on a presence at the AASLD's annual liver meeting taking place next week in San Francisco. As we announced last week, we will be presenting 28 abstracts at the meeting. The topics are broad in scope, and range from examinations of the unmet medical need in PBC, the differences in physician and patient perceptions of PBC, the clinical profile of OCA in the treatment of PBC and NASH, as well as noninvasive measurement of fibrosis in NASH based on new post-hoc analyses conducted in collaboration with the FLINT investigators.

In addition, we will be presenting several interesting pre-clinical abstracts. These include data that provide additional mechanisms of action-based evidence, supporting OCA's potential as an effective treatment of advanced cirrhosis in patients with NASH and other chronic liver diseases, as well as new findings bolstering our excitement about INT-767 as our next product candidate. We look forward to discussing these exciting new data in more detail at our AASLD Investor event on November 16. With that, I would like to turn the call over to Lisa to discuss our commercial preparations for the launch of OCA in PBC.

Thank you, Mark. So over the last few months, we've been really busy as we prepare for the approval and expected launch of OCA in PBC, and I am very excited to be able to share the following updates with you. Being launch ready in the West remains, of course, our top priority and our preparations have accelerated since the arrival of Richard Kim, our Head of Commercial US. We have now completed the hiring of 45 territory business managers, and most of them bring significant experience in liver diseases. Our TBMs are fully trained, and are now in the field with the goal of introducing our Company to our customers, and also to help better understand how our target customers currently treat patients with PBC.

We are also well underway planning for launches outside the US. And to date, we have appointed 10 experienced regional and country general managers across 17 European countries, including the UK, France, Germany and Spain. And also in Canada, who have in turn established small and highly experienced teams focused on preparations for market access. Lastly, we recently launched three disease awareness websites to help PBC patients better understand their disease, and improve the dialogue between physicians and patients. RethinkPBC.com supports physicians in the US, while livingwithPBC.com and PBCtogether.com are designed for patients in the US and the EU, respectively.

The progress that we've made so far in 2015 has been exceptional, and I would like to this opportunity to thank our teams for their ongoing efforts. I look forward to providing you with a broader review of the work we've done so far at our Analyst and Investor events in New York on December 1 this year. I'll now turn over the call to Barbara to review our financial position.

Thank you, Lisa, and good afternoon, everyone. Please refer to our press release issued earlier today for our summary of our financial results for the three- and nine-month periods ended September 30, 2015. We ended the quarter with $696 million of cash, cash equivalents and investment securities available for sale on our balance sheet. As you may recall, we provided adjusted operating expense guidance of approximately $240 million for the full-year 2015.

We anticipate that our adjusted operating expenses for the full-year 2015 will fall below our [ex] guidance of $240 million. This is driven primarily by the timing of hiring of personnel, certain clinical trial and related expenses, market and medical research expenses, and manufacturing related purchases for OCA. The build-out of the Company's commercial infrastructure remains on track, with recent hiring of the US sales team in October 2015, and continued infrastructure expansion in clinical development, regulatory and medical affairs is ongoing.

While we are not providing specific 2016 expense guidance at this time, we would like to impress upon you that we expect a significant step up in adjusted operating expenses next year, that I will detail for you now. Much of our head-count increase has occurred in late 2015, but it is important for you to understand -- to consider an annualized rate in your models, which would include the 45 territory business managers that Lisa just mentioned in her remarks they came on in October of 2015.

Second, we expect greater commercial spending, driven by the anticipated approval of OCA in the US in the first quarter of 2015, with increased spend in our European build-out during the year. Finally, we expect substantial increases in 2016 R&D expenses, driven by the execution of a robust NASH development plan, including the REGENERATE trial which was initiated in September, the CONTROL NASH statin study which we'll be initiating in this quarter, and several other trials we initiated in 2016 that we will provide more details for at our AASLD event. These initiatives are on top of other clinical efforts outside of NASH, including continuation of the PBC outcome, a long-term safety and efficacy trials, Phase 2 trials in PSC and biliary atresia, as well as the first Phase 1 program for next clinical candidate, INT-767.

Adjusted operating expense is a non-GAAP financial measure. We anticipate that 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. As the details on our financial results are contained in our press release issued this morning, I won't go into details on this call.

However, in relation to the $170.8 million warrant re-valuation expense recorded in the first nine months 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 the net loss. The last of the warrants were exercised on a [cashless] 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.

(Operator Instructions)

Matt Roden, UBS.

Hey, guys. Thanks for taking the questions. Good morning. I'm interested in the PSC study. Give us an update on the AESOP study. First, maybe can you, Mark, can you just remind us your thoughts on the underlying pathophysiology in PSC, and it's degree of similarity to PBC? And accordingly, your level of confidence that what we've in seen PBC suggest benefit in PSC as well? And then finally, what level of [Alk phos] reduction, would you need to see in the AESOP study to get significance in this -- I think it's 75 patients split into three arms? So if maybe you can tackle those? And then I have one or two follow-ups.

Yes, thanks for the question, Matt, and thanks for asking about a very serious disease that we don't have a chance to talk about very often. PSC, primary sclerosing cholangitis, I call it essentially a brother disease to PBC, because inasmuch as PBC is a disease of women, PSC is more typical in men. It is an autoimmune cholestatic liver disease, about a third as prevalent as PBC with no approved treatment, and it is pretty devastating in its course for a lot of patients.

This is generally considered a large duct disease, as opposed to PBC, a small duct disease. So it does histologically present differently. Patients with PSC are at a much higher risk of developing cholangiocarcinoma, and hepatocellular carcinoma is different cancers, and they also have a lot of acute on chronic flares in the disease. In terms of the mechanistic rationale, it is essentially identical for OCA, as an FXR agonist as the rationale in PBC, with respect to what we expect -- would hope to see in terms of ameliorating the disease course.

First and foremost, the anti-cholestatic properties of the ability of OCA to drive bile flow that accumulates in the liver in PSC and in PBC, and is toxic at higher concentrations. And second, in the anti-inflammatory and hoped for anti-fibrotic effects that we have shown in other disease settings.

In terms of your question, with respect to ALP reduction, there is admittedly significantly less evidence supporting Alk phos as the surrogate marker in PSC, as compared to PBC. There's no equivalent of the global PBC study group, or the UK PBC study group in PSC, which we hope to change over time. But there is literature now suggesting that lowering alk phos to below 1.5 times upper limit normal, for example again, lower being better, is associated with improved outcomes in the disease. So just final note, at the end of March 2016, FDA will be hosting a PSC endpoints workshop, and we hope to make significant inroads there in terms of clarity of regulatory path forward.

Okay. Thanks for that. And then can you talk a little bit more about the recruitment? You mentioned that you're going to have to -- or you have increased the number of trials sites to speed enrollment. Maybe can you talk about what you think that implies for the number of treatable patients out there? And also just potential timing of read-out?

Yes, I mean, look, it's a rare disease as I mentioned with respect to prevalence. We need to nail down -- I mentioned the prevalence of one-third, it's obviously a smaller fraction of that number are actually diagnosed and identified out there.

You also mentioned the 75; that's correct, there are 25 by patients in each of three arms to enroll. We are not going to comment at this point, in terms of when we expect to have data available. But we are very committed to this study, hence these -- the doubling of sites to accelerate enrollment.

Okay. Great. And then, just real quick, shifting gears to 767. Can you talk about operationally, the steps you will take, once you are in a clinic? I presume you'd start off with a PK study. Can you talk about we expect to see vis-vis OCA, and whether or not this would initially be in healthy volunteers or in patients? And then lastly, what you think the appropriate indications would be to pursue, because you can imagine -- you could take this on a couple different directions. So just like to get your latest thoughts on that. Thank s very much.

Hey, Matt, it is Rachel. I will take that question. So you are correct, and so this is going to be a first-in-man study, a single ascending dose study in 2016, to give us a good sense of pharmacokinetics, as well as initial safety data. At this point, it is just too early in the development to really talk to specific indications. So we will be able to provide more information on that once we have a better assessment of -- coming out of this initial study.

But as Mark said, this compound has the potential to be very differentiated from OCA. It's certainly significantly more potent by FXR assays in vitro, and a lot of the animal work shows some compelling profiles relative to OCA. So how that turns out into the clinic, we will just have to wait and see.

Okay. Thanks for taking the questions.

Thanks, Matt.

Michael Yee, RBC Capital Markets.

Hi, thanks, good morning. A couple follow-ups.

First, just following up on 767, can you actually remind us if you -- if there is specific evidence suggesting differences in cholesterol profile, or more importantly, pruritis or some of those other tolerability questions that would differentiate it? I know there is another -- I know it is different, but there's another FXR agonist in the clinic that appears to make those claims. I just wanted to try and understand the profile of 767, other than just potency?

And then, second question on PBC, can you just give us your latest thoughts on your dialogue with FDA as it relates to a panel, and whether you have been essentially told to expect one, and we're coming upon 60 days to January? So just trying to understand that a little bit, and your latest discussions and thoughts there? Thanks.

Thanks, Mike, for the question. I will take the first one, and Mark will take the second one.

So on 767, again, it's probably too early to say. There's no good preclinical model that can predict cholesterol changes or pruritis changes. If you recall, OCA actually showed a substantial decrease in cholesterol in animal models, and we did see unique findings in the clinic.

So, I think for anybody making those claims, without actually being in the clinic and having human data, I would just be skeptical about for right now. So I think you're referring to a competitor hoping that they will have differentiated claims. I think it is just too early to say right now, so stay tuned on that.

Okay.

Yes, and Mike with respect to the animal. As we've said before we are expecting a panel. We are planning for it, and we've been engaged in mock panels as part of our intensive preparation. We will make an announcement. And that's -- we'll make an announcement -- when the -- if and when the panel actually publishes online, we will make an announcement at that time. We expect that to be about six weeks before the actual panel.

Okay. So you are thinking six weeks before? So that's fairly close, but that's what your discussions have suggested?

I think that's pretty typical.

Okay. Okay. Thanks.

Thanks, Mike.

John Eckhard, Barclays.

Good morning. Thanks for taking the questions.

The first question was again, going to be on the panel. Have you done an analysis of the members on this panel, to understand what their background has been in PBC? Depending on that level of understanding of the disease, again what kind of additional preparation may that take, to help in the education process during the panel? And I have another follow-up.

Yes. Thanks, John.

We don't know who the members are going to be, and I don't think we're going to find out until just a couple days before. Again, that's -- I think pretty typical. We are preparing for all kinds of scenarios, but most especially, the fact that we will have generalists on that panel. We can expect to have gastroenterologists who are not as familiar with the disease, and of course, we are preparing for that.

Okay, great.

And then on, on the NASH lipid trial and the cirrhosis trial that you mentioned -- and I recognize that in the coming weeks you're going to be giving some updates -- but just generally for the NASH lipid trial, could you just highlight what would be the top goals that you would hope to learn from this trial? And then, for the cirrhosis trial, is it safe to assume that you would start this trial, only after getting some regulatory clarity on what the acceptable end point would be?

Yes. So with respect to the CONTROL trial, the NASH statin study, the lipid study, really one -- the primary objective, of course, is to demonstrate prospectively the ability of standard statin use in this patient population to manage LDL effectively in combination with OCA. And, of course, as you recall in the subgroup analyses post doc that we did with FLINT, there was certainly apparent evidence that hypothesis is true. We are just going to show it, in a much more robust way in this study.

The second objective will be up to rigorously study lipid metabolic effects of OCA, looking at LDL and other lipid sub fractions and other signals. With respect to the cirrhosis study, yes, this is a very important study in our program.

Obviously, REGENERATE addresses a very high unmet need in a population of NASH patients with advanced fibrosis, but they are pre-cirrhotic patients. The highest unmet need, of course, will be in the cirrhotic patients, and we are committed to studying OCA in that population. So we will -- again stay tuned for additional details, but we will absolutely be talking to FDA about this study.

Great. Thank you very much.

Ying Huang, Bank of America.

Hi, good morning. Thanks for taken my questions.

So first of all, can you talk a little bit about the FLINT subgroup analysis. In the US patients, did you see that the most of fibrosis cirrhosis improvement was derived from the patients with diabetes or not? And how does that compare to the Japanese trial?

So thanks for the question. I think I understood it to be, what did we see in the subgroup of patients with diabetes?

And the answer is, we did present the subgroup analyses last year at the AASLD symposium. And then additionally at EASL, showing that in patients with diabetes in FLINT, the Western NASH patients, we did appear to have an even more robust signal with respect to histologic improvement, including fibrosis. And again, with respect to the Japanese study, different patient characteristics in that study population, and just impossible to compare to the Western NASH population that we've studied previously.

But I would just -- it's Rachel. I would just throw in extra comment on the Sumitomo Dainippon Pharma study. Just remember that there are fewer diabetics in that study. In addition, a number of base line characteristics that are wrapped up in the whole metabolic profile are quite distinct. So the patients in that study had a lower BMI, lower rates of hypertension, higher rates of dyslipidemia, when you -- and as I mentioned, lower rates of diabetes, and perhaps even the type of diabetes that might be slightly different in a Japanese population.

So I think it's, as Mark said, it is very difficult to compare. But the numbers of patients in each arm that would have diabetes are going to be relatively small and difficult to draw conclusions on.

Okay. Thanks.

And then I have a follow-up on the REGENERATE trial. I know you just started the enrollment in September. But based on your experience, can you talk a little bit about enrollment, in terms of how many patients you can enroll, and when do you expect to close the enrollment for the first 1,400 patients? Thank you.

Yes, I -- obviously with 1,400 patients, we are being very aggressive with this study globally. We will be going to, up to 300 sites around the world. It is too early -- we don't have enough visibility right now, so it is too early for me to comment specifically on enrollment time frame, however.

(Operator Instructions)

Liisa Bayko, JMP Securities.

A question: I was wondering if you could give us some details (technical difficulties) commercial strategy, how many [persons] you will be targeting, where are the patients located, are they concentrated, as far as that kind of thing? Thank you.

Sorry, Liisa -- (multiple speakers)

So yes, Liisa, thank you very much for your question.

I mean, we are going to have a quite extensive event on the December 1, when we are actually going to spend quite a lot of time taking you through our commercial strategy, and all the work that we've done to date. So I am just going defer that question until we meet at the beginning of December.

All right. Fair enough. Thank you.

Joseph Schwartz, Leerink Partners.

Thank you very much.

So I heard you mention that you have been very engaged with the FDA throughout the review process for PBC. So I was wondering, how that has been going relative to all of the extensive work that you did with super group analyses, et cetera? Has there any -- have your interactions essentially flowed directly from that? Has there been anything that you think indicates that things have evolved at all since you have done the work as we head towards the PDUFA?

Yes, look, I -- we are not -- we don't comment on specific regulatory interactions. However, what I will say, is that we have a very good working relationship with the GI division that's reviewing our NDA with respect to the -- and there are a number of areas we are interacting on, of course.

The super group data, out of the global PBC study group, certainly does provide very compelling evidence in a database of over 6,000 PBC patients, with respect to these surrogate endpoint alka phosphatase bilirubin-predicting clinical outcomes, liver transplant free survival, to be specific. So we are very confident in the robustness of the data supporting the endpoint. And then, remember, of course, there's also another big database I alluded to a few minutes ago, the UK PBC study group database, as well, which is published.

And will you be able to use any the -- any of that material as you hopefully get approved, and try to address the patients that need OCA beyond what they've had available for the last 20 years? Are you able to use any of that information? Is any of that available to you, or do you have other proprietary databases that you are working on?

Well, yes, absolutely. Both databases are published now, and highlight the extensive unmet need in the PBC population. And basically, the word back from the data is lower is better, with respect to alkaline phosphatase. Same is true of course, of bilirubin, and this surprising finding was that bilirubin even within the normal range, that lower was better. So I think it is very robust and highlighting the unmet need in the population.

Thanks for taking my questions.

Danielle Brill, Needham.

Hello, thanks for taking my questions. I'm in for Alan. I was curious if you have any guidance on the biliary atresia trial, when you expect a read-out for that?

Thanks for the question. No. It is too early. We literally just are getting it underway, and so it is too early.

We've done a number of studies that recently have gotten underway, and that will be getting underway, so no visibility yet. This is -- I just want to highlight though, that this is an ultra rare disease. It is a pediatric disease, and so -- there aren't -- they're really aren't that many patients out there.

Great. Thank you.

At this time, I'm showing no further questions. I would like to turn call back over to Mr. Mark Pruzanski, CEO, for closing remarks.

Great. I just want to thank everyone listening in today for your interest, and we look for to interacting those of you at AASLD, who can be at our event on Monday, November 16. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. It does conclude the program. You may all disconnect. Everyone have a great day.