Intercept Pharmaceuticals Inc (ICPT) 2015 Q4 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals 2015 full-year 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 website for two weeks from today's date. At this time, I would like to introduce Dr. Mark Vignola, Intercept's Director of Investor Relations. Please go ahead, sir.

Good morning and think you for joining us on today's call. We are reporting our financial results for the year ended December 31, 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 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 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 risk factors sections of our most recent annual report on Form 10-K and 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 include opening remarks for 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 Mark and thanks for everyone to 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 make a few comments on our ongoing commercial preparations. Finally, Barbara Duncan, our Chief Financial Officer, will then discuss our financial results and cash position.

2015 was a pivotal year for Intercept, marked by several notable accomplishments, including the completion of or NDA and EMA filings for OCA in our lead indication of PBC. The build-out of our global commercial infrastructure, FDA's designation of OCA as a breakthrough therapy in NASH with fibrosis, and the initiation of REGENERATE, the first-ever Phase III NASH trial.

Starting with our PBC program, in June we announced that we completed the submission of our applications in the US and Europe for marketing approval of OCA, for patients with PBC inadequately treated by, or intolerant of, standard first-line treatment URSO. Our application was granted priority review by the FDA in August. In December, the FDA notified us that the PDUFA date would be extended by 90 days from the end of February to the end of May.

2015 also marked the year that we initiated the transition from a development stage Company to a commercial-ready organization focused first on the US, and a subsequent European launch. Lisa will provide a few comments later on in the call on the work that our commercial team is doing.

2015 was also a pivotal year for our NASH program. In January, we received breakthrough designation for OCA for the treatment of NASH patients with liver fibrosis, to our knowledge, the largest such designation ever. Following extensive discussions with FDA and EMA, we announced a few months later the design of REGENERATE, the first-ever NASH Phase III registrational trial in non-cirrhotic NASH patients with advanced fibrosis, a serious chronic liver disease with no approved therapies.

Finally, in September, we announced the initiation of REGENERATE. We believe this is an important milestone for NASH patients, and for Intercept as a Company, in advancing our vision of developing important therapies for non-viral progressive liver diseases.

Along with REGENERATE, we announced in December the initiation of the CONTROL trial, which will evaluate the effect of OCA in combination with statin therapy on lipid metabolism in patients with NASH. Developing a broad and comprehensive NASH clinical program remains a key focus for us, and the CONTROL trial is an important next step in this strategy.

In addition to our efforts in PBC and NASH, 2015 was a year in which we expanded the disease areas we are exploring for OCA, marked by the initiation of trials in primary sclerosing cholangitis, or PSC, and biliary atresia. We also advanced our second compound, INT-767, a dual FXR and TGR5 agonist into the clinic in November of 2015. I believe that our accomplishments throughout the year have laid a solid foundation for an exciting year ahead, as we move towards our first product approval.

Turning to 2016, this is a year of execution for the Company, marked primarily by our anticipated PBC approval and launch, and further advancement of our global NASH development program. Starting first with the PBC program, obviously first and foremost on the horizon is our FDA advisory committee planned for April 7, followed by our PDUFA date of May 29.

I'd like to touch briefly on the announcement we made in December regarding the FDA notification of a 90-day extension in our PDUFA date. Just to reiterate, the extension was the result of FDA's request to us for additional clinical data analyses, based on our completed studies, with no new clinical studies requested. We maintain a very productive and constructive relationship with FDA, and look forward to continued interactions with the Agency over the coming weeks, as both the Intercept team and the Agency prepare for the planned Advisory Committee meeting in April.

For our European marketing application, our regulatory review continues. We anticipate marketing approval near year-end, with a European launch thereafter. As such, we do not anticipate ex-US OCA revenues until 2017.

As we continue to move OCA through the regulatory process, our commercial team is hard at work, preparing for a best-in-class launch of OCA in PBC. As we mentioned, Lisa will provide some color on the team's activity to date and key steps as we move towards our anticipated launch.

This year will also be a year of NASH program execution for Intercept. As I mentioned a few minutes ago, REGENERATE was initiated in September. Our team is focused on getting study sites up and running, with plans to target up to 300 sites across the US, Europe, and other Western countries.

We'd like to remind you that the screening process for any trial in NASH with a biopsy endpoint is fairly lengthy. In REGENERATE, patients must go through initial screening, scheduling of a biopsy, reading of that biopsy sequentially by independent central pathology reviewers to confirm NASH with stage two or three fibrosis, before finally being randomized.

This process is consistent with what you would expect in a Phase III trial with a biopsy-based primary endpoint. While we know you are eager for an update on our anticipated enrollment timeline, it's simply too early in the study to have sufficient visibility on enrollment at this time.

In the meantime, suffice to say that as the investigator meetings we have held in the US and Europe, as well as the large number of direct interactions we have been having with sites around the world, there's been tremendous enthusiasm for involvement in the trial. We are meeting that enthusiasm with all the support we can muster, including the creation of a dedicated trial website at www.NASH-study.com. Patient advocacy group, outreach, and other initiatives.

As I mentioned earlier as well, our Phase II CONTROL trial, designed to prospectively evaluate the effects of OCA on lipid metabolism and the impact of adding statins is currently enrolling patients. The goals of this trial are to evaluate the impact of varying doses of OCA on LDL and lipid metabolism, and to investigate whether low doses of statins added to OCA therapy adequately control LDL, consistent with the previously-reported data from a subgroup of patients in the FLINT trial who were started on a statin during the course of treatment. We are currently in the planning stages for additional NASH studies, including a NASH cirrhosis study, and a non-invasive technology site.

I'd now like to turn the call over to Lisa Bright, our Chief Commercial and Corporate Affairs Officer, for a few comments on our commercial efforts.

Good morning. Thank you, Mark. As Mark mentioned earlier, 2015 was a pivotal year for Intercept from a commercial perspective. We assembled a really top-notch organization in both US and in the EU.

We are really excited about the work that the commercial team has done so far, including detailed analysis to help us not only understand how PBC patients are treated, but also how many PBC patients there are, where they are located, and which physicians are caring for them. At the same time, we have gained insights on key challenges that we face for marketing OCA in PBC, and have developed strategies from both a medical affairs and a commercial standpoint to address these challenges head-on.

From an infrastructure perspective, in October, we completed the hiring of 45 territory business managers in the US, a majority of whom bring deep experience in the liver disease space. We also appointed 11 experienced regional and country general managers across 17 European countries, including the UK, France, Germany, Spain, Italy, and also Canada. Thus far in 2016, our US team has continued their efforts both internally and in the field, and is taking full advantage of the extra time granted by our 90-day PDUFA extension.

With this time, our US team has been able to reach more community GI physicians pre-launch than we would previously have been able to do, and as you know, they treat most of the US PBC patients. So it means that we been able to understand their PBC treatment practices.

We are also initiating PBC disease state speaker programs, to increase general awareness about the disease, and the current treatment approaches. We recently conducted speaker training for these disease programs with over 70 healthcare practitioners in Dallas. Finally, we're working through pre-launch logistics and coordination, with the goal of making sure that every part of our organization is stress test and ready to execute upon approval.

In Europe, we're planning for a late 2016 approval, with our commercial launch to follow thereafter. Our ongoing efforts include holding pre-launch readiness reviews with our early launch countries, conducting payer advisory boards to help us understanding differing health technology assessment requirements between the countries, as well as the detailed health economics to support those submissions. And also working to ensure our distribution network is in place well in advance of approval.

We look forward to sharing more information with you about all of our commercial readiness later this year. And with that, I'd like to turn things back over to Mark.

Thank you, Lisa. As many of you know, Barbara Duncan has been by my side for many years. She led the Company's IPO, and has been responsible for most of the $1 billion Intercept has raised, over half of which in 2015 alone. Just last month, we announced that Barbara would be leaving Intercept.

With the need to address the Company's growth into a global commercial organization, we have decided to bring in a new CFO with extensive experience in the financial management of such a Company. Barbara's fully committed to facilitating a transition, and will remain the CFO of the Company through midyear, with the commitment to provide whatever consulting services and time we need to ensure the smooth on-boarding of a new CFO.

I'd like to think Barbara personally for her time and service, in helping build Intercept into a truly global Company. With that, I'll turn things over to Barbara to discuss our financials.

Thank you, Mark, and good morning everyone. Please refer to our press release issued earlier today for a summary of our financial results for the full year ended December 31, 2015. We ended the year with $628 million of cash, cash equivalents, and investment securities available for sale.

Our detailed financial results are contained in our press release, issued earlier this morning. Our 2015 non-GAAP adjusted operating expense was approximately $196.1 million. This amount excludes non-cash stock-based compensation expense of $34.2 million, and depreciation expense of $1.7 million.

For the fourth quarter of 2015, we reported non-GAAP adjusted operating expenses of $76.6 million, which excludes non-cash stock-based compensation expense of $12.1 million, and depreciation expense of $600,000. Please see our press release from earlier this morning for a reconciliation of our historical non-GAAP adjusted operating expense to our GAAP operating expense.

The increase in our expenses in 2015 was a result of infrastructure build-out, supporting not only our general corporate activities, but also our pre-commercialization activity in the US and internationally, and expansion of our research and development efforts.

For the full-year 2016, we are guiding for adjusted operating expense in the range of $360 million to $400 million, which excludes stock-based compensation and other non-cash items. These expenses will support the pre-commercialization activities of our US and international teams, and commercialization expenses anticipated post-approval. They will, in addition, support a growing clinical program that includes a broadening NASH program, including the REGENERATE and CONTROL trials, continuation of the PBC outcomes and long-term safety extension trials, Phase II trials in PSC and biliary atresia, as well as our Phase I program for our next clinical candidate, INT-767.

We know that you will be updating your models to reflect our new operating expense guidance, and you should expect that our spend would be somewhat higher in the second half versus the first half, with the increased activity related to the planned US commercial launch following approval. While we are not providing sales guidance at this time, we want to remind you of the following: Given the 90-day extension of our PDUFA date, it is reasonable for you to model additional revenue starting in June. Ex-US, we do not expect revenues until 2017.

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

With that, I'll turn it back to the operator for questions.

(Operator Instructions)

Matt Roden of UBS.

Great, thanks. Good morning, thanks for taking the question. I just want to start by congratulating Barbara for a great run in getting the Company to this point, and best of luck in your future endeavors.

Maybe I can start with a question on the upcoming Advisory Committee panel. When you talk to our clinical and regulatory consultants, what do you anticipate would be the biggest debates over the approvability of this drug in PBC? And I guess really, can you just talk about what you are doing to best position the data in front of the AdCom? I'm sure that this is the biggest focus for you at the moment, and you are spending a lot of time on it. I just wanted to see to what extent you can bring us under the tent, and talk about the flex points. Thanks.

Sure, thanks Matt. You are right. This is really the focus of the Company, with respect to getting OCA approved in the US. As I have mentioned in the past, we expect the main focus, frankly, to be the surrogate endpoint, that will serve as the basis for accelerated approval. This is, as you know, an unprecedented endpoint in this disease. There hasn't been a drug after URSO in the last 20 or so.

With respect to providing evidence in support of the endpoint that we used in Phase III being reasonably likely to predict clinical benefit, the bar for accelerated approval, we believe we have really overwhelming evidence, starting with the fact that, as you know, there are two, not one but two, gigantic clinical databases, the global PBC study group and the UK PBC group, both of which published in the last couple of years, showing with a combined total of over 10,000 PBC patients in North America and Europe, that alkaline phosphatase on its own, bilirubin on its own, and the two combined, specifically defined as our Phase III endpoint, predict long-term liver transplant-free survival. So we feel that this evidence from these two independently built and published databases definitely provide the evidence in support of the surrogate.

And that said, as you know, we, like any other responsible Company, have been preparing intensively for any and every kind of question that could come to us from an expert panel. We are, as I alluded to in my comments, we are working very constructively with the GI division at FDA to prepare for the AdCom, and of course, 90-day extension in PDUFA has given both of us additional time to do so. So I think that the team will be extremely well prepared for April 7.

Great, thanks for that color. Maybe if I could ask one follow-up for Lisa. Lots of factors that can go into how product launch gets out of the gate. In my mind, there is -- some of the issues that you raised on your prepared remarks, regarding the extent of the unmet medical need, the pent-up demand, physician awareness, comfort with the product profile, et cetera.

But I wonder if you may focus in a little bit on access and coverage. I think if you look across the industry, one of the hallmarks of recent drug launches has been very significant barriers to access in some cases. Can you talk about how you plan to address those barriers, what needs to be done from your perspective, what can you control, to maybe facilitate prior authorizations, or ease that process so that the launch trajectory itself best represents the underlying demand for the product?

Yes, thanks Matt. So I think we talked about this before in our when we had our meeting before Christmas, about the fact that we have hired a really strong team here in the US. A managed markets team who have got significant experience in launching and gaining coverage for specialty therapies, with both the private and public payers. So that team has been very focused on doing extensive payer research with both the national and the regional payers to ensure that we understand how payers are going to cover and reimbursed in patients with PBC, with OCA.

So things are progressing will. I think the payers really understand that there is a significant unmet medical need for this. As you'd expect, those conversations are ongoing.

Great, thanks very much for taking the questions.

Michael Yee of RBC Capital Markets.

I had two questions. One was on NASH. You described and recently announced the initiation of the lipid study. I just wanted to understand if you can go back and explain a specific endpoint, what you would view as a positive outcome, and then the timing of enrollment and timing of data, whether we get data later this year.

And the second question actually was for Barbara. Thanks for the guidance on OpEx. $350 million to $400 million versus $628 million in cash. Can you just describe how you are thinking about your cash options, a year from now, or thinking about that for next year? What are your different alternatives, and would you ever consider an EU partnership, or how should we be thinking about that? Thanks.

Thanks Mike, I will take the first question, and hand it to Barbara. With respect to the CONTROL study, just want to reiterate, there's a dual objective of the study. First, we want to demonstrate prospectively that adding a standard statin therapy, which is recommended in any case by ASLD and EASL in NASH patients can adequately nip the LDL increase that we see with OCA in the blood, and be safely combined with OCA. Again, replicating what we've demonstrated -- what was demonstrated in the FLINT study with data that were presented next year.

The second objective is to do a detailed study of the lipid metabolic effects, so subfraction analyses, for example, with respect to cholesterol and other lipid analytes. With respect to timeline, obviously this is a much smaller study than REGENERATE, so it will read out before REGENERATE, but as I mentioned in my remarks, there is really a fairly lengthy screen-in, lead in process here with biopsy proven patients. And so it's just too early to provide you with visibility at this stage. When we do have adequate visibility, we will definitely come back to you with a more concrete timeline.

All right, and Mike, thank you, it is Barbara. So yes, as you had indicated, we have given out the guidance of the $350 million to $400 million and our cash balance of $628 million. So the question is, what sort of financing opportunities would we have. As you know, as biotech companies, we're always looking at our cash, and making sure that we are using it prudently, and investing in the right assets.

And we don't give out specific guidance as to when or where or what types of financing alternatives we would look at. I think in terms of the partnership that you indicated for the EU, as we indicated, we did make substantial investment in this current year in 2015, building out internationally, and so I think that we believe we are in a good place, in terms of being able to launch this particular product on our own, and that's been our strategic vision for a while now.

Thanks.

Jonathan Eckard of Barclays.

This is Bryan on for Jonathan. Just two questions. One, on the CONTROL study. Are there any interim data points that could be presented? For example, transition into the last 12-week portion or when patients have transitioned to the statin expansion phase? Additionally if you could talk about the fact that there hasn't really been any visible engagement by large biopharma in NASH development, and based on your knowledge of what is being developed today in NASH, what assets are currently in the hands of large pharma? Thanks.

Sure, thanks Brian I'll take the first question and hand over to Rachel McMinn for the second question. With respect to the CONTROL study, the answer is no. There is no interim endpoint. There is a 16-week study 80 patients, and so we are just going to wait for the results of the study to come in before announcing anything. With respect to competitive landscape --

Thanks for the question. There are a number of companies, most pharmaceutical, large pharma companies, as well as large biotech have stated certainly a strategic interest in NASH, but as I'm sure you are aware, the field overall is extremely early. Most of the products are either pre-clinical or just going into the clinic now, so there's not been a lot of data. There are a few exceptions right, with Gilead has talked about simtuzumab, and we're still awaiting results of that Phase II-b study from a two-year endpoint, but otherwise everything is very early, nothing with any real proof of concept data, that you can hang your hat on.

Okay, thanks a lot.

Alan Carr of Needham & Company.

A couple of them. One of them, can you talk a bit about your plans with the NASH cirrhosis trial. Any updates on timing for that? Maybe your discussions -- any updates on discussions with the FDA, and what that might look like?

And also, you have a number of investigator-initiated trials, or some of them that look like they are going to start. Wondered if you could comment a bit on the strategy there. Thanks.

Sure, thanks, Alan. With respect to the NASH cirrhosis study, we are in play right now with the regulatory authorities, and we have increasing crystallization of what the study is going to look like. Obviously, a big unmet need in NASH cirrhotics, but at this point, all I'm prepared to say is that we are in the planning stages. We do, by the way, anticipate using hepatic venous pressure gradient, or HVPG as a primary endpoint in the NASH cirrhotics, and you might recall that approximately two years ago, we read out on a small proof of concept study in alcoholic cirrhotics, where we demonstrated the ability of OCA to lower, reduce HVPG in a relatively short term one-week to ten-day therapy.

So the idea over a longer-term in this study in the cirrhosis, NASH cirrhosis study, would be to demonstrate the same. However, it's too early right now to give you visibility on study start. We are committed to doing it, to planning it, and that's -- we will come back to at a later date.

With respect to IITs, yes, there has -- there have been IITs in the past, there are a couple ongoing. And there is definite interest in conducting IITs, but at this point, I don't have an update for you on any specific IITs that are coming.

I know you didn't want to comment, or didn't look like you want to give much resolution at this time for this cirrhosis trial, but might that start this year even?

Yes, sure. It's possible, but I'm not committing to it.

Okay, fine, thank you.

Ying Huang of Bank of America.

It's actually Catherine for Ying. Just a couple questions. Have you conducted any sub-analyses at different call-outs other than the 1.67 for ALP, and how important do you think this cut-off will be in a commercial setting if OCA is approved? And then how should we think about the initial uptake in PBC, if it is approved? Duration of treatment? What you think is a good proxy to use for the launch? Thank you?

Thanks, Catherine. Good questions. With respect to your first, the ALP cut off. You might be aware that over time there been a number of single-center studies, retrospective studies employing different cut-offs, different kinds of endpoints, most of which were based on alk phos on its own or combined as an anchor parameter with bilirubin and other liver enzymes.

And the answer is yes. We have run our Phase III data on every single one of the endpoints that have been previously published, and all of them that are alk phos based have shown unequivocally the same answer, which is that no matter how you cut it, what alk phos-based endpoint you used, the OCA-treated groups both titration 5 to 10 milligram and the 10 milligram dose groups in the POISE trial came out very significant, compared to placebo. With respect to the commercial side, I will ask Lisa to comment on where we are going to focus.

Thanks. Thanks for the question. We know in the US that around 15,000 patients with PBC still have an ALP greater than 1.67 times the upper limit of normal, even after predominately those have been treated on first line treatment. So there's a significant need amongst that particular patient group, and I suspect that's likely to be where physicians start, when they start thinking about treating patients for PBC.

In terms of proxies, we really haven't found a good proxy that we've used. We have very much gone back to first principles with this, because this is a high unmet need area, we know. There's been really nothing for 20 years for these patients, and this is largely going to be used after [SO] have failed to give adequate control. So I think there's 1.67 over time. I'm sure that there will be more uptake in that group over time, but certainly to start with, we definitely see, and certainly based on the research, that the majority of uptake will be in that group above 1.67.

Great, thanks much.

Ritu Baral of Cowen and Company.

I know you don't to comment on REGENERATE enrollment yet, but could you give us a little detail on the sites? How is site activation going, and are the screen failure rates, at least at this point, in line with your expectations?

Yes, thanks. I will say that we are very hard at work getting sites up and running in the US and other countries. I alluded in my prepared comments, prepared remarks, to the investigator meetings we've been having in the US and Europe. These have been extremely well-attended with universal enthusiasm. And again, not surprising.

This is the first-ever Phase III NASH registration trial, and there is really a lot of interest around the world, in participating. I'm not going to provide you with more specific update, except to say that I'm pleased with the pace which we are getting the study infrastructure up and running worldwide. I am also not prepared to give you screen fail rates, but suffice it to say, we are screening for first and foremost a diagnosis of NASH with advanced fibrosis, pre-cirrhotic fibrosis, stage two and stage three. There are a lot of patients like that out there, but obviously you will have screen failures.

I want to take the opportunity to circle back to a question that Alan asked about the timing of the cirrhosis. The NASH cirrhosis study that we are planning. Just to give a little more color that REGENERATE really is the -- what I call our aircraft carrier of a NASH study, and that's where a lot of the Company's resources are focused right now, getting the study fully up and running, and enrolled as fast as possible. There's a lot of enthusiasm with respect to the NASH cirrhosis study on the regulatory agency side. And as I alluded to, we are getting crystallization of what the study design is going to look like, and we will plan its initiation at an appropriate time.

Just a quick follow-up on that. Then a question on numbers. Do you anticipate significant competition for patients for REGENERATE with other Phase IIIs that are going on?

Right now, there is no competition. There is only one other Phase III trial that was announced just prior to year-end, to our knowledge. The trial has not been initiated yet. And so we are right now unimpeded. There are a number of Phase II studies that have been enrolled or that are enrolling, but again, there a lot of NASH patients out there.

As we look at the OpEx guidance that you have given us, and we as we look at last year's numbers, how should we think about the increase between R&D and SG&A? Obviously, you have a launch going, but you are starting additional significant additional R&D. How should we look at the OpEx number, and then are you between the 45 reps in the US and the 11 regional managers in Europe and Canada, are those the final numbers, or is there still hiring going on between 2016, and possibly 2017?

Thank you, Ritu for the questions. Let me take the last one first, and then we can move into the guidance numbers. In terms of, as we mentioned earlier, the infrastructure for the US commercial is mostly complete. And so we do have a few extra people, but it's not meaningful in terms of what we need to hire for the US launch. Ex-US, we have a pretty significant infrastructure as well that we built during 2015, and so we will have other investments that will be necessary.

When you think about -- I don't know if that answers that particular question, but it won't be significant as what we had to incur during 2015 for that build. When you think about your split out between R&D and your G&A guidance for next year, if you look at the fourth quarter in terms of -- and we did provide that number for you even on the adjusted OpEx basis, the reconciliation for the three months ended December 31, 2015, we had about $77 million of adjusted OpEx, and that was split primarily between the R&D, and it was almost an most equal split between R&D and G&A. And even on the stock comp, we didn't provide that breakout. It's about roughly half, so you can see that the breakout was roughly half. And we're not giving our guidance for both -- specific guidance around R&D and G&A. But we would expect that run rate would look fairly similar.

Great, very helpful. Thanks for taking the question.

Jim Birchenough, Wells Fargo.

It is Nick in for Jim. Thanks for taking our questions. Perhaps first going back to the surrogate for PBC, obviously the LP thesis has been around and developed for a long time, and perhaps since then there have been big changes in Big Data, especially genetics. Are there newer concepts that are being developed as a surrogate in PBC that perhaps reflect earlier stages of the disease process? And then I have a follow-up.

Thanks, Nick. It's an interesting question and obviously PBC as an autoimmune disease has a genetic component. In fact, first degree preponderance is I think, amongst the highest of the autoimmune diseases. And there have been genetic studies and mapping that have revealed some SNPs that are common to PBC patients.

However, these are purely research studies. I am not aware of any more advanced work that is proposing a genetic marker as a surrogate in the disease. I do want to point out that particularly UK PBC and also the global PBC study group, have looked pretty extensively at identifying patients who are at increased risk, and would therefore be strong candidates for therapy with OCA.

And one thing we know that was published last year in the UK PBC is that patients who were diagnosed at a younger age, less than 50 years of age, tend to be more rapid progressors, and less likely to respond adequately to URSO. And basically what the data show and the younger you start treating these patients, the better.

We can have a more extensive discussion off-line about the genetics of the disease, but we think that alkaline phosphatase is really the right surrogate. And it's also the one in clinical practice, frankly.

And then as a follow-up, it's an add-on to an earlier question, but you're after two populations here. You have the intolerant population, and then obviously the population that is a poor responder or non-responder. In terms of the intolerant population, is there a proxy there that you have looked at in terms of how you think insurers are going to help define what is intolerance of URSO? And then secondarily, once you get past the bolus of patients were sitting out there above 1.67, do you see 1.67 is a light switch that as patients get there, they will switch over onto OCA, or do you see it as there needs to be a rate of change, and they need to go past 1.67 in a certain period of time in order for them to be perceived as having a high risk of really bad outcome? Thank you.

Thanks, Nick. I'll ask Lisa to take that on.

Thanks for the questions. I think the first piece on intolerance, the proportion patients who are intolerant to us, the rates vary somewhere between 3% 5%, 3% to 7%. And intolerant quite often meaning that tolerating it from the side effects perspective. Quite often they don't get the optimal dose of URSO on the basis that they're finding it more difficult to tolerate. So I think that certainly the discussions with payers space is that they understand that's a group that may well need access, they have been treated and they are still not really getting the optimal dose.

So I think that we will see some really strong interest from prescribers, in wanting to give access to that group, but it is a relatively small group. Obviously a much bigger group are those that have still not achieved an adequate control, even after they have been URSO for say, 12 months or so. The key really is that a lot of physicians don't really think about things as 1.67 times upper limit as normal. They tend to have a more absolute number in their head, whether it is 150, or something similar to that.

And I think one of the great challenges for physicians is at the moment, there is no standard set of guidelines around PBC. There's no common perceived wisdom about exactly what level you might treat to. And so over time, I suspect that whilst initially the uptake will be higher in those who have got more advanced disease naturally, there is, again even with the payers, a recognition that beneath this 1.67 cut off, there are patients who are, as Mark has said, rapid progressors, who have got higher probability of progressing their disease through to more advanced fibrosis and cirrhosis. And I think it will be just a natural change over time as people move backwards through the disease and the severity of the disease.

The only thing I'd add to that is that at our commercial day back in December, we presented some market research in the US and Europe. And what it showed was that the large majority of treaters who see both hepatologists and gastroenterologists, who see PBC patients, who want to treat to lower is better, where alk-phos is concerned. I just want to reinforce Lisa's point that in the clinic, neither physicians nor patients tend to think of a 1.67 time upper limit normal, they're not sitting there with a calculator figuring that out. They are thinking about an absolute number or just simply lower is better for patients above -- who are persistently above normal.

So how does that -- how do think insurers will deal with that? Your data is, presumably the label will say 1.67 the upper limit of normal.

Lisa?

Most people?

We're in those discussions right now with payers. This has been an area that no one has really looked at for 20 years. That's the thing. The level of understanding of this disease area is still relatively low.

I think I mentioned before that we have been doing disease state education and speaker meeting training, and what the -- even they key opinion leaders are crying out for is to have much better disease state education around this, for people who have been involved, but maybe not treated a lot of patients with PBC. And I think these are discussions that are still ongoing with payers about where they are going to see the best value but that is something that we are committed to doing, and we've hired a really strong team who were able to translate the clinical data into something that is very meaningful from the payers perspective

Thank you.

Just one last point on -- and this goes to how you think about modeling the launch here. I think its an important thing to convey, which is that PBC patients, the ones who are not in immediate danger clinically, tend to follow-up with their physicians semiannually or annually. And so as we said back in December, we want to caution that we don't see this as a warehousing effect, where you are going to get a big bolus at launch. We see this as a relatively smooth ramp-up, as we penetrate the market, and the patients come back into the clinic for their regularly scheduled visits.

Joel Beatty of Citigroup.

Could you provide some color on your plans for a trial of non-invasive diagnostic technology for NASH, and what you can do as a Company to support this adoption, and also what non-invasive diagnostic techniques you see as most promising?

I'll actually ask Rachel McMinn to take that question. She and her team have been working very extensively, evaluating non-invasive technologies.

Thanks for the question, Joel. So as Mark mentioned, we're still very much in the planning phases of this trial, but as you know, there is a host of different kinds of technologies ranging from different kinds of imaging technology through standard algorithms, up to more proprietary biomarker research that's just underway now. I think our goal in this trial is to -- we've got a number of different goals, but we do want to help connect with the field, with thought leaders, and make sure we are helping to advance the field, and really to advance our long-term initiative, which is to ultimately replace liver biopsy as close to launch as possible in NASH.

If you recall just back a few months ago at the ASLD meeting, we showed just some additional data from the FLINT sub-analysis, that showed patients with a response just on a standard algorithm of [SIB4] in the first six months were likely to have a fibrosis improvement at 72 weeks. And that's actually pretty powerful data.

So what other kinds of metrics and data can we collect in this trial, to help support and advance that, so that when physicians are in practice will have an approved drug, they will be able to make intelligent decisions, hopefully without having to biopsy both on a response as well as on -- ultimately on monitoring and diagnosing patients. I would say stay tuned, and we can have a more lengthy discussion on the differing technologies. We provided a little more detail at our analyst event at ASLD, and I'd be happy to take you through more details off-line.

Thank you.

Joe Schwartz with Leerink Partners.

Thanks very much. Regarding our outreach to physicians, are you getting the sense that they have a significant number of their PBC patients in mind as early adopters? I heard what you were just saying Mark regarding the lack of a warehousing effect, but I'm just wondering, relative to how we on the Street are modeling the launch, if you could give some qualitative commentary around what you are seeing, as far as the resonance of the unmet medical need in the market, on the most practical level, which is at the patient level, regarding relative to how you are seeing all of us model things.

Thanks. I think Lisa is best positioned to answer that.

Thanks for the question. As you know, we have been working with our territory business managers to really understand and profile those physician who have been very much involved in treating PBC today, and of course it goes without saying that we can't at any point discuss the data, so what we are trying to do at this stage is really understand how they're thinking about managing their patients with PBC.

I think it's pretty clear that there is a real strong recognition of the unmet need, particularly for patients who have been treated for some time, for whom they still have an elevated ALT. And as Mark quite really said, in the US, 50% or so of physicians still ideally would like to get patient's ALT to normal, but I think practically, at the beginning, physicians will initially look at patients who have got a slightly higher ALT to start with, as they gain experience. But for sure, I think the recognition of the unmet need from a qualitative perspective is very strong.

Okay. And then after patients are on the drug, can you talk about the types of activities you will undertake to keep them on drug, if they are experiencing side effects like pruritis, any special nursing or other expectation setting or other outreach that you will be employing?

So it's one of the things that we recognize, is that it's going to be important, firstly to ensure that physicians and nurses are really well educated around the pruritis data, which Mark has already talked about. And from a commercial perspective, we will make sure that we have a really best-in-class patient services hub that will support the patients through that journey. And so its something that we want to make sure the patients feel supported, and most importantly the physicians the nurses involved have good access to good data through the medical affairs team.

Thank you.

Liisa Bayko of JMP Securities.

Just a follow-up on the whole issue of a non-invasive diagnostic. Can you maybe talk about, based on feedback from regulators, other stakeholders, your own opinion, what are the steps needed from here to getting that to be a reality, and what do you think the timing is on that at this juncture?

Good question, Liisa. I think the good news is that all of the key stakeholders, whether its FDA, industry, or the thought leaders that treat these patients, all want to get rid of biopsy. We recognize that it's currently the gold standard and required in our trials, but we all want to get to a non-invasive diagnostic and staging technology that is reliable, affordable, and takes the place of biopsy.

I think you know, as Rachel mentioned, what we are committed to, both in our Phase III in the REGENERATE trial to some extent, and more specifically the non-invasive technology study we are planning, is to identify the best-looking of these different modalities. Correlate them ultimately with histology, with biopsy, and provide sufficient validation to the satisfaction of both FDA and the thought leaders, to ultimately replace biopsy. And our goal will be to do so as close to or proximate to launch of OCA for NASH so that we can dramatically expand the market.

And just a follow-on what Mark said, Lisa, just so we are clear, at least at this juncture, we're not looking to develop a companion diagnostic, which is something that you might have seen with oncology. So we're not looking for something that specific. There is a lot of different -- there's a lot of different technologies out there, as Mark alluded to. It's not just the non-invasive technology study, which is going to be much smaller, but we will also have a huge amount of data coming out of REGENERATE, where as you know as we talked about before, we have got a number of non-invasive technologies built into that study. But just to be clear, we are not looking for a specified regulatory approved companion diagnostic. That is not the strategy at this point.

Okay, got it. And just wanted to ask a pipeline question. I noticed that for the 767 program, you are planning a Phase II. If you could just give us timing on when we might see Phase I, what data from that, and give us your vision for Phase II? Would this be a biopsy study, or something shorter? That would be helpful, and that's my final question. Thank you.

Liisa, 767 is a very exciting asset. I have said this before, that in pre-clinical models, animal models, chronic liver, intestinal and renal disease head-to-head against OCA, this is a better looking molecule. And of course, the hope is that this translates in the clinic. Right now, we are focused on completing Phase I. We expect to complete the Phase I statin match study this year. And then we're going to plan Phase II from there. It is too soon to give you an indication of which indication we're going to be focused on in Phase II.

Operator, we will take one more question.

Brian Skorney of Robert W. Baird.

When we think about the endpoints on CONTROL, in terms of the sub-fractionation of LDL HDL, what do we hope to learn, and what would you expect, given the pre-clinical data for OCA, and how does that feed into the overall thinking about the profile there?

Brian, I'll take the question, it's Rachel. As Mark mentioned, there are two different parallel endpoints that we are looking at. The most important of which, from a clinician perspective, is really be statin piece. What dose can you effectively offset or more than offset the LDL increase just by OCA, with standard statin therapy. That is really the most important piece of data that will come out from physicians.

In terms of subfractions, as you know, there has been some focus and mention on small dense LDL particles, and so it will be of interest to see what happens when patients are treated with OCA, whether it is the large LDL are the small LDL that is really driving the overall LDL increase. But I have to say that there is no consolidation and consensus within the lipidology community. If you are going to go and poll a number of thought leaders there, and say if large LDL goes up, is that a good thing, or if small LDL goes up, is that a good thing?

All we know today is that LDL is the surrogate for cardiovascular risk. And we also know statins can offset that. While it will be of interest and there will be lots of discussions, and of course, we're committed to understanding this in mechanism, it is less clear on, overall how to interpret how the field will interpret those data, and what the field well do with the that data.

Thanks, Rachel.

With that, I would just like to thank everybody who listened in and participated on this call this morning.

Ladies and gentlemen, thank you for your participation on today's conference. This concludes your program. You may now disconnect. Everyone have a great day.