Intercept Pharmaceuticals Inc (ICPT) 2016 Q3 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals third-quarter results conference call. (Operator Instructions) At this time, I would like to introduce Dr. Mark Vignola, Intercept's Director of Investor Relations. Please go ahead.

Good morning and thank you for joining us on today's call. Before we begin, please remember we will be making certain forward-looking statements on today's call, including statements and forecasters regarding our future financial and operating performance, anticipated timelines for the commercial launch of Ocaliva in primary biliary cholangitis or PBC, market estimates relating to PBC and the commercial potential of Ocaliva as treatment for PBC, 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 the Risk Factors section 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 will include remarks from our CEO, Mark Pruzanski; our President of International, Lisa Bright; our Senior Vice President and Head of US Commercial, Richard Kim; and our Chief Financial Officer, Sandip Kapadia. We will then open up the call to take your questions. Rachel McMinn, our Chief Business and Strategy Officer, is also available to answer questions during the Q&A portion of the call.

We would like to note that we have slides associated with the call. These can be accessed via the webcast or on the Events section of our IR website.

At this time, I would like to turn the call over to our CEO, Dr. Mark Pruzanski.

Thank you, Mark. Good morning and thank you for joining us on our third-quarter financial results call.

2016 has been full of key inflection points for Intercept, and the last few months were no exception as marked by completion of our first full quarter of the US launch of Ocaliva for the treatment of patients with PBC, the publication of our Phase 3 POISE trial in PBC and the New England Journal of Medicine, and the recent exciting news that the EMA's CHMP has recommended European approval of Ocaliva for PBC patients inadequately treated or intolerant to standard of care UBCA, the identical indication to our US approval.

We have also enrolled our target number of patients in two key Phase 2 clinical trials: the AESOP trial in cholestatic liver disease called primary sclerosing cholangitis, or PSC, and the CONTROL trial evaluating the ability of OCA and concomitant statin therapy to regulate LDL-cholesterol. We expect top-line data from both these studies in 2017.

We are making progress on our development pipeline as well, continuing to enroll our REGENERATE trial in NASH, finding the expansion of our NASH program with additional trials and patient registries, and we are on track to complete by year-end our Phase 1 trial for INT-767.

Overall, we remain committed to three key strategic objectives: establishing and maintaining a leadership position in PBC, establishing and maintaining a leadership position in NASH, and building a liver disease focused product pipeline.

With that, let me summarize our progress over the quarter in the Ocaliva launch. Ocaliva sales for the quarter were $4.7 million, reflecting strong initial demand from physicians and treating PBC patients. The quarter was marked by solid progress on reaching out to our target prescriber group and securing reimbursement coverage with key commercial providers. Despite these accomplishments, our work is just beginning. As we have said before, Ocaliva is the first new drug for PBC in nearly 20 years. And while we have strong interest from both physicians and patients, it will take time to educate the market about the risks to the patients with elevated alkaline phosphatase levels, despite PBCA treatment. This will require a continued dedicated effort, and Richard will shortly provide you with more details on the progress we are making.

Moving now to our NASH program where our Phase 3 trial REGENERATE remains a top priority for the Company. As a reminder, REGENERATE is a large complex trial involving serial liver biopsies. We continue to strive for the completion of enrollment of our interim analysis cohort within the first half of 2017. However, in order to achieve this guidance, we need to continue to increase our enrollment rate.

With this goal in mind, we have been implementing a number of operational initiatives and are also evaluating several available options to maintain our timelines.

With respect to control, we are happy to announce today that we have completed our target enrollment of more than 80 NASH patients with fibrosis, and we will shortly be closing off patient randomization.

As a reminder, this trial is a 16-week placebo-controlled trial, evaluating three doses of OCA: 5 milligrams, 10 milligrams, and 25 milligrams. The trial is prospectively evaluating the impact of statin therapy added to OCA on LDL and the effects of OCA on lipid metabolism.

Across our other programs, we are also making good progress. As I mentioned earlier, we completed enrollment of our Phase 2 AESOP trial of OCA and PSC in September of this year. As a reminder, AESOP is a 24-week placebo-controlled trial evaluating two titrated doses of OCA: 1.5 milligrams to 3 milligrams and 5 milligrams to 10 milligrams with titration occurring at 12 weeks. The primary endpoint is to evaluate change in alkaline phosphatase. This trial is the first clinical experience we will have with OCA in PSC, a devastating disease with no approved treatment options and more complicated course compared to PBC.

Finally, we are just a little over a week out from the AASLD meeting, the key US medical meeting in liver disease. For us, this year's AASLD will be the first as a commercial stage company where we will be able to talk about Ocaliva and present our new branded materials. We expect a key highlight of the meeting to be new data from the Phase 3 POISE trial, which will provide more information on OCA's treatment effects on liver stiffness as evaluated by transient elastography by noninvasive means of measuring liver fibrosis. We believe these data add to Ocaliva's profile beyond its published effects on biomarkers alone, and we expect this will generate interest from the medical community.

With that, I would now like to turn the call over to Richard to provide you with an update on the US launch.

Good morning. As Mark mentioned, we achieved net Ocaliva sales for the third quarter of $4.7 million. The third quarter represents the first full quarter of our marketing and sales efforts. And, while we are still early in the launch, we are encouraged that our experiences thus far are supported by a solid opportunity in the PBC market.

I would like to first provide an update on what we have seen in the field. Our territory business managers have now seen more than 90% of our target physicians, and overall the physician feedback on Ocaliva has been very positive. HCPs are excited about the first of new therapeutic option for PBC patients in nearly 20 years.

But, as we have previously mentioned, given the slowly progressive nature of PBC, changing behavior will continue to take time.

Enrollment into our patient services hub, Interconnect, had been robust and verify our fundamental assumptions about the PBC market opportunity. Let me provide you a little more detail on the patients we are seeing.

Consistent with our call in August, the majority of patients enrolled in Interconnect are line without Phase 3 POISE population. Nearly all patients are initiating Ocaliva on the 5 milligram dose. While it is too early in the launch to discuss compliance or persistency, our Phase 3 data showed optimal tolerability when starting with a 5 milligram dose.

We know that reimbursement is a key area of interest. We are happy to report that we have made good progress with payers. We now have more than 145 million lives covered with the bulk of coverage added in the fall. Coverage is generally consistent with our label.

We are pleased with the success we have had with payers and how Ocaliva had been moving to full pulmonary coverage. That said, we believe that this transition has contributed to a flattening of (inaudible) new prescriptions over the past several weeks. The primary driver of this is a shift of Ocaliva from a medical exception process to full pulmonary coverage, which has led to a temporary slowing of the conversion of enrolled patients into patients receiving shift product.

But, as I mentioned earlier, we are very encouraged by the initial enrollment through Interconnect. We believe that the coverage process will improve over time as published prior authorization criteria become available.

Another quick note on IMS. We continue to view IMS as directionally accurate and a good tool to monitor our performance. However, we expect that NRX will be a less reliable metric of new patient demand going forward in the launch as prescriptions from titration will show up in the system as NRXes. As more patients hit the three-month mark, this group represents an increasing portion of NRXes.

As we look forward, we believe we have a number of factors to support an increased momentum for Ocaliva in the US. First, our Ocaliva marketing brand campaign was recently approved by the FDA's OPDP division. As you are aware, through the majority of September, we were promoting predominantly off a product insert. We now have a brand-new marketing campaign that has resonated well with customers. The official tools and messages will augment our territory business manager's ability to educate physicians on the unmet needs in PBC.

Additionally, we are executing our updated speaker of programs with our new branded messages.

Secondly, we have just begun to attend medical conferences as a commercial entity. These are important venues for us to interact with our target healthcare providers. Early in October, we attended the American College Of Gastroenterology Conference. Next week, as Mark mentioned, we are attending the AASLD meeting where we expect to engage a broad cross-section of the hepatology community.

Next, as mentioned during the third quarter, our Phase 3 POISE trial was published in the New England Journal of Medicine. This publication is an important milestone for the Ocaliva launch as it is an essential factor in accessing many large academic institutions who require a peer-reviewed publication for treatment protocol decisions.

Finally, we expect additional coverage decisions into the end of year, and as these decisions become formalized at more payers, we expect the time from prescription to product shipment to contract.

To summarize, we remain engaged in our goal of bringing Ocaliva to the many PBC patients in need in the US. We have made excellent progress to date, but will continue to work hard as our job has really just begun.

Thanks and now I would like to turn the call over to Lisa.

Thanks, Richard. We are making great progress towards launching Ocaliva outside the US, and I am excited to provide you with an update. First, I would like to highlight the great news that the CHMP recently recommended granting a conditional marketing authorization for Ocaliva in the EU. We continue to plan for marketing authorization by the end of the year.

This is a tremendous development, not just for our international efforts, but also for patients with PBC in the EU. This announcement brings us one step closer to bringing these patients their first new therapy in nearly 20 years.

In September, we announced that we had filed a new drug submission to Health Canada for marketing approval of Ocaliva for the treatment of patients with PBC. The submission was granted priority review.

I would like to thank the physicians and patients who participated in our clinical program and our regulatory team which has resulted in these positive outcomes.

Having just returned from UEG, Europe largest gastroenterology meeting, it is clear that there is a high interest in cholestatic liver diseases. Our medical teams have now made over 2000 contacts with key PBC physicians and held over 25 advisory boards and have helped us develop a good understanding of PBC management in Europe and Canada.

We continue to make great progress in preparing for the anticipated launch. We have started recruitment of our sales force in early launch countries in addition to our medical and marketing access teams who have been working closely together now over the last 18 months.

We plan to be able to reach 90% of hepatologists and greater than 20% of gastroenterologists or approximately 7000 physicians, which, between them, care for at least 90% of PBC patients in the major European countries.

Good progress continues to be made preparing for reimbursement at a local country level, predominantly focused on demonstrating cost-effectiveness and budget impact.

We are reiterating our previous guidance that we do not expect international revenues until 2017. We expect initial sales in early access countries, primarily Germany and France and, to a lesser extent, Canada and the UK. Prior to final pricing and reimbursement, a small number of patients with no other treatment options may be able to access their caliber through an early access program.

In France, for example, we are in the process of getting an ATU up and running, working with a French regulatory agency, highlighting the significant unmet needs in PBC. Several patients in Switzerland, Austria, and Denmark have also been granted access under their own local regulation.

With that, I would like to turn the call over to Sandip.

Thank you, Lisa, and good morning, everyone. Please refer to our press release issued earlier today for a summary of financial results for the quarter ended September 30, 2016.

I would like to take this opportunity to give you a brief overview of three key areas: our third-quarter results, our cash position, and provide financial guidance for the balance of the year. So let me get started with the third quarter of 2016 results.

We recognized Ocaliva net sales for the quarter of $4.7 million, which reflected our estimate of filled prescriptions. Please note that until we establish a history of sell-through, we will be booking Ocaliva sales based on this method.

For the quarter, [gross net] fell in the 10% to 15% range. We expect this number to be relatively consistent in the fourth quarter. As we enter 2017, we expect gross net to be slightly higher. Cost of goods was de minimus for the quarter as the costs related to manufacturing was expensed prior to FDA approval of Ocaliva. The Company expects cost of goods to remain negligible until previously expensed supplies for OCA are sold.

So let me move on to our cash position. We ended the quarter with $780 million of cash, cash equivalents and investable securities on our balance sheet. As a reminder, this includes approximately $409 million net proceeds from our July 2016 convertible notes transaction. The $409 million in proceeds are net of underwriting fees, offering expenses and funding for the call transaction.

In connection with convertible transactions, we have recognized $7.1 million of net interest expense in the quarter.

And, finally, financial guidance. For the full year of 2016, we are revising our adjusted operating expense guidance to $320 million to $340 million as a result of lower than expected clinical trial costs and delayed timing and raw materials purchase for OCA R&D manufacturing. We do expect an uptick in operating expense in the fourth quarter, but not as high as we had previously expected given the costs that were delayed into 2017.

We would like to reiterate that we do not expect ex-US Ocaliva sales until 2017, and this will be on a country by country basis as we attain pricing and reimbursement.

Finally, as a reminder, adjusted operating expense is a non-GAAP financial measure. We anticipate that other than the net $45 million charge or the shareholder's litigation, stock-based compensation expense will represent the most significant non-cash item that is excluded in adjusted operating expense as we compare to operating expenses under GAAP. Please refer to our press release from earlier today for a reconciliation of our historical non-GAAP adjusted operating expense to GAAP operating expense.

With that, I would like to turn it over to the operator for some questions. Operator?

(Operator Instructions) Michael Yee, RBC Capital Markets.

Two questions. One is maybe you could expand a bit on your commentary around some of the changeover as you move to formulary access and how that impacts against the cadence of sales for Q4. How would you think about Q4? Flattish? Higher? How do we think about that?

And then, for NASH, you made some comments about ensuring enrollment rates. Are you implying accelerating rates? Are you implying maintaining those rates? And how do you think about your confidence admitting first-half 2017 enrollment timelines? Thanks so much.

Hey, Michael. It is Richard Kim. I Will take the first question and pass the second one to Mark.

So, as far as coverage is concerned, we are really pleased with the fact that at this point we already have 145 million lives covered in the US. I think what has gone on right now is remember these physicians previously were dealing with generic (inaudible), and now they are dealing with our process with a branded specialty product. So we think there is a bit of a learning and adjustment period here. I think for Q4 it is still going to be going on to a certain extent. But, over time, I think it will work out, and the coverage will be a very positive thing for us. I think this is a temporary situation that will just take some time. So Q4 also will have the complication of holidays and things coming into the mix as well. But we are really pleased with our coverage so far, and we think that in the long run this will really help expedite patients getting on to Ocaliva.

And, Mike, it is Rachel. Just because it sounded like you were asking for guidance for Q4, we are obviously are not providing revenue guidance at this time. But as we have said in the past, we do believe that IMS, even though it is not perfect, is directionally accurate so you should be able to use that as a guide to generate your estimates.

Okay.

Mike, look, as you know, this is the first NASH-based three outcomes trial that any company has conducted. It is obviously a major undertaking, given the size, complexity, the need for serial biopsies. It is clearly a huge priority for us, and we are working very hard to enroll it as expeditiously as possible. We would have hoped to have seen a bit more of an uptick in enrollment at this point and have recently done a deep dive to identify opportunities to further improve an enrollment, which we have already started implementing. And I will just give you an example, maybe obvious, but just given strong strong interest from investigators, who continue to approach us around the world, who have NASH patients in their clinics. We decided to increase the number of sites to around 350 from the original stated goal of a target 300 sites. And obviously, that should help drive enrollment further.

So, to your question about enrollment rate, I mean, as you know, in any large study, towards the end of the study, you see a clear (technical difficulty) curve as enrollment accelerates, and we would expect to see the same with REGENERATE. And, frankly, we're just looking for an increased slope to the curb.

Okay. Thank you.

Alethia Young, Credit Suisse.

Just one more on maybe like patient behavior and around people coming back for treatment with the Ocaliva launch. Are you getting the sense that patients are mobilized and, again, it is just a matter of maybe the reimbursement and that process being slow? And then I have one more question.

Thanks. Lisa. As far as the patients are concerned and our physicians, the feedback has been very positive. The new enrollments into our Interconnect patient services has been robust, and I think right now, as mentioned earlier, I think we are in sort of a temporary state as we are sort of going from medical accept review to actually prior authorization review. So some of the patients are getting caught up with it, but we do believe that this is really a temporary situation.

All right. And then, on IMS, do you think that it will correct itself going forward a little bit, or will you be able to work with IMS and better inform -- I mean, I heard some of the answer, but it sounds like the titration of dose is what is causing a little bit of discrepancy. Is that correct?

Yes, you know, the IMS data we absolutely believe is directionally correct. I think on a weekly basis, there is probably a little bit more error week to week. But I do think going forward now with NRXes, it will be compounded by patient titrating from 5 milligrams to 10 milligram. We are sort of starting to spend to that phase where more of these patients should be experiencing that. So I think you're going to have to start to look at some of the differential dosing utilization there as well. But IMS, I think, will staydirectionally correct for a lot of the data.

Is new to brand better than NRX?

Yes. New to brand is usually a better surrogate. As you know, for NRX, if you switch a dose, that is fabulous as an NRX. The new to brand is usually a better surrogate for new patient starts. That is correct.

Great.

Ritu Baral, Cowen and Company.

CONTROL is now enrolled. What constitutes success we you see the data? How should we be looking at -- what sort of data will you produce top line, and how should we think about that?

So, as you remember, in Flint, we did post-doc analyses with the Flint investigators, and we demonstrated that patients who had seen an LDL increase and had a statin added reversed their LDL increase to below baseline levels. No different from placebo. So the statin did what it was expected to do. And CONTROL is a prospective study to reproduce this finding and demonstrate that the statins which are indicated in NASH patients with elevated LDL can safely be added to OCA and control LDL effectively. So that is the primary goal.

Another goal is to further explore the lipid metabolic effects of OCA, so looking at both cholesterol and triglycerides.

Should we expect to have subfraction data on top line, and is there any sort of margin of error as far as returning LDLs at baseline or around baseline?

You know, I can't specify exactly what we are going to put out top line, but we are going to be looking at subfractions. And we will be looking to report the data out at an appropriate scientific meeting once available.

Got it. And then my next question is on the Ocaliva launch. You mentioned that moving from medical exception to formal published prior requirements is maybe slowing some of the prescriptions. Can you walk through the mechanics of why that would be, and also, what is in place right now for prior op, and what do you expect -- how do you expect that to change what might the range of prior op requirements be, say, six months from now?

It is a great question. So I think as far as some of the mechanics are concerned, sort of envision a patient going through medical exception, and it is a lot of manual work. But what happens oftentimes is when the prior authorization criteria is published, there are different fields of data that are required. So what happens, then, is it is being kicked back to either the specialty pharmacy or the office to update the data, and unfortunately, it is just a temporary position right now where it is slowing down the process.

As we think about the criteria right now, we would say what we are seeing generally is it is quite well aligned to -- it is very well aligned to the label. There are different nuances from different payers, but we are generally very well aligned to the label thus far. So I think over time I think that is why we have a terrific medical management market team that is out there. But I think over time, we will continue to see a lot of the coverage be consistent with what we have in our label.

What is the most restrictive and what is the most permissive that you are seeing right now as far as prior op?

You know, generally, the criteria is pretty good. There are some plans that have op levels associated with [1.67], and there are some plans that just stay at elevated (inaudible). So there is still quite a bit of a range. So it is really hard to sort of say there is a specific type that is going on.

So I think it is typical of a lot of product launches where different payers will react differently. But I think the most restrictive we have seen is an out box that at least 1.67, which was well within our expectation.

Got it. Thanks for taking all the questions.

Ying Huang, Bank of America Merrill Lynch.

Can I ask before what you have observed in your (inaudible) about compliance and also persistence of Canada in PBC patients so far?

And then, secondly, with the most recent Gilead announcement on their NASH program, I was wondering if you could comment on what they are seeing in the Phase 1/2 study and also whether you expect any competition from enrollments on your REGENERATE trial?

And lastly, what can we talk about the difference between US market and the EU market on PBC in terms of what expectations for the launch and the dynamics and treatment landscape? Thank you.

Thanks for all those questions. So we have got a bunch of questions. We are going to start with Richard on compliance and persistency, and then Mark will talk about the Gilead -- the competitive landscape, and then we will have a Lisa come in and talk about her perspective from the international versus the US.

So, Richard?

Thanks for the question. So, as far as compliance and persistency is concerned, I think it is a little too early still to make any definitive statements on this.

What I can say anecdotally is, I was at the American College of Gastroenterology meeting just a few weeks ago and met with a lot of customers, and we are not hearing any massive issues as far as (inaudible) things. It is going to happen out there, but we have not heard anything out of the ordinary. So right now, I would say it is a little early. We are still going to be going through the period for dose titration as well. But thus far, there has really been nothing that we have heard that has been unexpected. Maybe, Mark, if I turn the next question over to you.

Yes, thanks. So, with respect to competitive landscape, the first point I would make is that our drug dossier remains the only one to have a very robust Phase 2 well control data study set behind it that gives us the confidence that we had in designing and proceeding with the REGENERATE study, which is well matched to Flint.

No doubt, the competitive environment has been heating up with recent announcements from other companies intending to proceed into Phase 3.

I would say the Gilead NASH 1 result that you asked about look interesting, but it was small data set, uncontrolled study, about 72 patients. And from our perspective, given that it was only 24 weeks and in a pre-cirrhotic population, it is looked a little anomalous that you saw patients potentially advancing to cirrhosis in such a short period of time.

So and then, of course, there was the announcement of Cantuzumab not making it in well-controlled studies. And for me, for us, this highlights just how difficult this is. The need for well-controlled, robust studies to really prove out that a given drug has anti-fibrotic effects. And, frankly, you're also seeing companies design studies -- were announced that they are going to be designing Phase 3 studies that cleave to the mechanism of the action of the drug, be it an anti-fibrotic or an anti-(inaudible) type mechanism. And, again, just want to circle back to OCA, which remains the only drug out there to have shown the ability to hit all the key features, not just fibrosis, which clearly is the most important, but also key features of (inaudible) hepatitis.

In terms of -- the final point that you raised, which is potential competitive enrollment environment, clearly, I mean, right now we are generally unopposed out there. I mean, there are some small Phase 2 studies. Genfit has its Phase 3, but as I mentioned in my earlier comment, we are working to enroll REGENERATE as expeditiously as possible and keep ahead of the competition. And there are patients out there, of course.

Okay. Yes. Thank you for the questions. Look, I mean, I think the patient care pathway and the management of PBC is essentially similar to that being in the US across the European countries. Of course, the patient numbers for PBC are similar to, if not slightly higher than the US. But, of course, there are some fundamental differences, two in particular, of course. One is, of course, pricing and the other the timing of reimbursement.

So we generally expect pricing in Europe to be lower than the US. I mean, we have generally said before in specialty medicines 40% to 50%, and of course, pricing and reimbursement timeframes are very country specific and are gated. So, clearly, uptake in those countries is very much dependent on the timing of pricing and reimbursement. And, as we said before, we expect that 2017 international revenues are mostly going to come from the early access countries of Germany and France, and, to a lesser extent, from Canada and the UK.

Thank you very much.

Salveen Richter, Goldman Sachs.

This is actually [Kerry] on the line for Salveen. Congrats on the progress, and thanks for taking my questions.

So I have two. First, I was wondering if you could clarify the timeline around the CONTROL study. Do you expect to top-line the data and would we see the full data, including any read on NASH activity coming in a potential medical meeting next year?

And, second, what is your view on the competitive landscape given the recent data from Gilead's drug? Do you see the potential for a combination therapy using [AS-1] inhibitors that makes our agonists to be synergistic? Thank you.

It is Rachel. I will take those questions. For CONTROL, at this point, we are not committing to anything beyond 2017 at this point. We would expect, given the study, that the high interest from investors that results would be top line. Keep in mind, this is a 15-week trial, but there is also a washout period for any patients who are coming into the study on statins. And you obviously need time to clean up the data for database loss. So, as you are formulating your timelines, you can kind of work through that math on your own at this point.

In terms of the competitive landscape, as Mark said, it is very, very early days. Most products out there don't have Phase 2 data, and some of the ones that do have either failed their Phase 2 study and are using a secondary endpoint or an endpoint that wasn't even successful in doing a subset analyses or are based on very small uncontrolled studies. I think even when we look at companies that have Phase 2 results, our perspective is that there could be substantial clinical risks that some of our competitors are taking on as they move into Phase 3.

So just being in Phase 3 doesn't mean that they are going to have a successful outcome.

In terms of combination, as we said before, we remain intensely interested in this, but given the early stage nature of the overall development pipeline, it becomes difficult to figure out what makes the most sense. I think we view OCA as a potential backbone of therapy. It is low dose, once a day, limited interaction for drug-drug interactions. It is a marketed product at this point in liver disease. That is different, but certainly already approved has an extensive efficacy and safety database. So we think that this is a valuable option down the line for combination therapy, but not going to provide any more specifics at this point.

Thank you.

Jim Birchenough, Wells Fargo Securities.

A few follow-ups. So just generally, I'm just trying to understand how reasonable your target enrollment is and what is required of the new site you are enrolling. So if the new sites you enroll at pace or at the early pace of the prior side, can you hit your targets, or do you really need existing sites to ramp up enrollment as well? And when are you going to have a better sense for us whether you are going to be able to hit that enrollment target? And then I've got a follow-up.

Yes. Thanks. As I said in my prepared remarks, we remain committed to meeting the timeline. And we are exploring a number of options, not just in new site, but others. And, frankly, at this point in time, we are not going to provide additional details on what options we are pursuing.

And, Jim, sorry, we are not trying to be cute, but just given the competitive nature of NASH and the number of companies that are trying to learn from everything that we are doing, we would just prefer to keep those kinds of comments to ourselves at this point.

So maybe a commercial question. I'm just trying to get a sense of how much of a bottleneck the prior off requirements may be creating. Can you give us some sense of how many commercial patients you have on drug right now versus patients coming into Interconnect, and what is the lag between prescription and getting the drug to patients currently? I want to understand that this is really more of an administrative barrier as opposed to onerous requirement that patients are having (inaudible). Thanks.

Jim, it is a great question. So, as far as the process is concerned right now, I think what is going on is, once again, a lot of our customers are getting used to from going from prescribing a generic product, which had no process to a specialized pharmaceutical product that does have a prior authorization process to it. So I think there is definitely a bit of an adjustment there. And as we contemplate in the prepared remarks, the enrollment into Interconnect is robust, and it is meaningfully higher than what we are seeing through the IMS trends right now.

So what I would say right now is we are sort of in this temporary adjustment period right now. A lot of this is really typical. A new products specialty launch in an area like this. But what we do see is, once we actually have patients with clear prioritization criteria, a patient starting that right from the beginning, it should be much more streamlined going forward. But, like I said, we are about halfway through with 145 million lives covered thus far, so we have more to do. But I think we made really good progress there, and we do expect things over time to improve.

And then, Jim, I think you had asked a question on what the time from when a prescription is written to when it is actually (inaudible) service, so maybe you can.

Right now, it is probably somewhere around four weeks, give or take a little bit. Some are taking a little bit longer as we are experiencing, and some that actually start with the prioritization process are starting to go through quicker than that as well.

So we are still in this sort of temporary flux period, and I think as a little bit more time goes forward, we will have more pure metrics around it as well.

Ian Somaiya, BMO Capital Markets.

I was disconnected for a short period of time, so I hope this is not a repeat.

Two questions. One, just referencing one of your slides, there is a description of the type of patients that are coming on to therapy. Obviously those fit the POISE inclusion criteria, and then there were some other buckets. Was hoping you could describe the other bucket and how we should think about that patient population over time?

Second question just relates to, obviously, a bit of a land grab that we are seeing from companies with deep pockets, and the question was specific to your BD strategy. How is that influencing the business development strategy, both from a standpoint of developing a proprietary combination for procuring a proprietary drug that you could use as a combination? And then, does it change your commitment to NASH from a licensing BD standpoint and maybe refocus this to other areas where you could leverage your sales force?

I will take your first quick question, Richard. As far as the patients coming in, we believe the vast majority of them are very aligned to the POISE population. What we are seeing right now is that somewhere around 10%-ish who are intolerant, and the other bucket is predominantly a little bit of mix of both intolerant, also patients without (inaudible) below 1.67. So that ranges somewhere around 10% to 15% of our patients. So from the initial baseline (inaudible). But the vast majority of our patients are definitely aligned to the POISE criteria.

In terms of our business development strategy, I think we are still a relatively young company. We are not going to be able to compete for assets to the extent that prices are in NASH. But I would also underscore again this idea of just substantial clinical risks. Some of the prices being paid, we understand because it is the NASH market and certainly we agree with big Pharma and other companies that are spending the amount of money of what that actually means for the ultimate unit potential size of the NASH opportunity, but there is a lot of risk in there. So that would not be a good use of our capital structure.

So I think in terms of how we move forward with combo, as I mentioned, I think it is early days. We have a lead compound with a very strong profile with the strongest profile out there, as Mark said, working on both fibrosis as well as other aspects of NASH. So we think this is a unique asset. And as the pipeline of compounds actually move through, we do see an opportunity to collaborate and use OCA as a backbone in one or perhaps multiple therapies.

I think it is too early days to think about how could we use BD outside of NASH, but certainly it is something that we would be considering.

Alan Carr, Needham & Company.

This is [Danielle] on Alan. Thanks for taking my questions. I was wondering if you could comment more on why you think REGENERATE enrollment is slower than expected, and then maybe on development plans for 767, what indications you are thinking about and how it is different from Ocaliva?

Yes. Thanks for your questions. You know, as I mentioned a few minutes ago, this is the first Phase 3 NASH outcomes trial. It is a very, very major undertaking. It is a global study. We are working with a number of investigators who have had limited experience working in NASH. And at the end of the day, it requires serial biopsies, and, as I mentioned on our last earnings call, no matter how good you are at assessing a patient on a prescreening basis, at the end of the day, you're only going to qualify for this study if you meet very rigorous histologic inclusion criteria, and that results in expected relatively high screen fail rate.

So there are a number of different factors that drive the rate of enrollment in a study like this. And, of course, we are learning as we go, and as I mentioned, we have identified a number of different opportunities to improve productivity in enrollment. And we remain committed to meeting our guidance and our timelines for getting the interim analysis cohort enrolled.

On 767, at this point, the Phase 1 is not yet complete. So I think we are waiting for that data to help guide our decision on indications. But, as Mark has said before, pre-clinically, it is a very strongly effective compound relative to OCA. So there is a lot of potential opportunities we could take this forward into these (inaudible) and NASH and other indications as well. So I think we want to better understand the profile from Phase 1 and use that to guide our decision.

Okay Thank you.

Jay Olson, Oppenheimer.

I am curious about AASLD and anything that you think we should be paying attention to that could potentially shed light on -- either on Intercept or your competitors, either in NASH or PBC. Thank you.

Yes. Thanks for the question, and I don't know if it came through in the prepared remarks given the technical issues, but we are very excited for this meeting. It will be the first that we attend as a commercial company, and it hopefully will be a very productive meeting.

I do want to highlight one abstract that will be presented by one of our POISE investigators, and this is on additional data and noninvasive fibrosis assessments by transient elastography or Fibroscan in a subset of the Phase 3 population we studied and, also, a composite biomarker score called [AppRead]. And this actually extends our understanding of what potentially might be going on. There is a hint of a signal, despite the fact that there was relatively few patients studied in POISE, and also there is a relatively short period of time.

So that is one thing that I think I want to highlight for the meeting, and there are a number of other abstracts that we are going to be presenting as well.

Yes. And just from an external perspective, to Intercept, a number of -- as I am sure you are aware, FXR -- competitive FXR are early stage data, and I guess our perspective is that not all FXR agonists are created equally. You will look across abstracts and see a massive multiple orders of magnitude just in dosing, overall profile, and our position is that it is going to be very difficult to base any conclusions on Phase 1 data. So I think our view is that this will be interesting to see some initial profile, but we are really going to need to see Phase 2 data from some of these other FXR agonists that really prove out that if they don't have certain side effects, a big question is whether or not they have any efficacy. So I think we are hoping not to learn that this meeting, but perhaps a year or two from now.

Great. Thank you.

Joseph Schwartz, Leerink.

This is Brett Larson in for Joe. First on PBC, curious on the launch so far having reached the vast majority of target prescribers, are you seeing greater breadth or depth of adoption? Or, in other words, do you find that your high-volume treaters are -- have transitioned all their patients, or is it more of you have reached an important mass of low-volume treater adoption?

And then also on PBC, curious, you mentioned a couple of times how coverage is generally consistent with the label, but curious if you can provide a little more color on when the coverage does deviate from the label indication, what are those inconsistencies?

Great. Great question. So, as far as our treater base is concerned, I think we are still very early on as far as the number of treaters that come on board.

What we have stated in the past is, this is a disease where we didn't expect a lot of patients to rush in at the beginning of a slow steady buildup. Patients are coming in for their regularly scheduled visits. So we have seen a higher prescription rate from our lead targets, but we are also seeing use in the community and other practices as well.

So it is still a little bit early to say, but we definitely are adding new prescribers on a weekly basis, both in our lead targets and in our overall target group and even a few outside of that group as well.

As far as the coverage is concerned, what we can say so far is we have seen no criteria that solicit from a difficulty) prior authorization that is more restrictive than what we have seen through quite at this stage.

So right now, we would say we are very consistent with what we have seen thus far, but at this point -- and, once again, those could always change -- we haven't seen more restrictive criteria at this stage. A lot of it comes down to the requirement of do you need just a checkmark for [ELFOS]? Do you need a specific lab value? But as far as the alignment to the data, we haven't seen anything more restrictive in place at this stage.

Okay. Great. That's helpful. And then, last question. Are you aware of any suspected or concerned confirmed attempts to prescribe off-label for NASH so far? And is it your sense that there are any payers that have not put in place controls to prevent this from happening?

Yes. So right now, through our Interconnect patient services, we actually do not triage any patients who are not PBC. So our visibility into that is really not that great. So I really haven't heard that much of it, to be very candid. And, once again, through Interconnect, we really don't have that visibility, much of that visibility. So not a lot I can read on it at this stage.

Okay. Great. Think you very much.

Joel Beatty, Citi.

For the approval rates that you have been seeing, have you noticed any difference between patients that have been intolerant to or so compared with patients that had inadequate response?

It is a great question. So what I would say is, when you go through some of the criteria, it is usually easier to actually just check the box from intolerance when it comes to patients with an adequate response. As I mentioned previously, some of the variation is whether or not they actually require specific lab value or whether or not you are just checking that it is inadequate or elevated out box.

So we haven't heard meaningful differences, but what I can say is, when you are bringing someone through for intolerance, there is generally less deals that have to be filled out for those patients.

Thank you.

Jeff Hung, UBS.

Given the additional time on the market, can you talk about how the average number of interactions needed by your salesforce for physician prescribed Ocaliva has changed over time?

No problem. By the way, I have got to say now being the commercial person, we do call it Ocaliva, for everyone on the call. But I do like Ocaliva sometimes.

But, as far as the number of interactions, it really does vary by customer. As we have said, different people are on different journeys as far as their awareness for PBC, so it is really hard to say how many interactions. All I can say is our targeting strategy on the lead target and our overall 4000 target group we believe is with the right one. We are seeing the right people. But it is really hard to say because I think people are in different parts of your journey as well right now.

And then on the time for script to get through, previously, you mentioned four to six weeks. If I heard correctly, it is now closer to four weeks. But given the change due to formulary coverage, does that imply that for a period of time over the last two months (inaudible) four weeks?

Yes, I think what we are seeing is, in general, when a patient starts through the process almost fresh under -- at their new published criteria, it is going pretty good. Maybe I could even say a little bit less than four weeks, but now we also have some of these patients who are getting caught up who were beginning through one process of medical exception and now going through a PA, which we are actually probably going over for four weeks.

So we are in a bit of a flux period right now. Over time, when we have more published criteria, PA criteria, we think time will improve, but right now we are kind of in that flux period right now, if that makes sense.

Sure. Thanks.

Brian Skorney, Robert W. Baird.

This is [Nina] on for Brian. Just two questions. One is you mentioned that most patients are starting on the 5 milligram dose and then doing the titration up. Do you have a sense of what percentage are starting to actually on the higher dose and why physicians might be choosing to just start there without doing titration?

And then, the second question is, I know you said that -- it is obviously a little early to talk about compliance and persistence, but have you heard anything about discontinuations, anything associated with pruritus, and do you expect that ultimately the discontinuation rates will settle around what you saw in the POISE study, or are you expecting to see something different? That is all.

Great. Thanks for the questions, Nina. So right now, what we can see through Interconnect is around 95% of patients start on the 5 milligram dose. So, obviously, about [10] don't. Sorry, about 5% start start on the 10 milligram dose. So weekly our message to everyone is to start at 5 milligrams. That is what is on our label. That is what we communicate.

There is no real reason. I think my intuition, as some people know, that 10 milligrams is where people want to get to. But we don't have really any specific reasons why a few physicians might be initiating at 10 milligrams.

As far as the compliance rates are concerned, I mentioned before, and as you said, it is kind of early to see. It is hard to speculate between real-world data and what happens in a clinical study. But what we can say thus far is we have not heard -- I have not heard -- I mean we will have discontinuations. That is a given. But I haven't heard anything inconsistent with how we view the product profile. I also will say we are getting (inaudible) where patients will be dosed titrated, so we are going to learn a little bit more over the next few months as well.

Lisa Bayko, JMP Securities.

Actually, my questions were just answered. Thank you.

Jim Molloy, Laidlaw.

This is actually [Frank] on for Jim. Most were also answered, but just a couple in terms of timeline here. In terms of REGENERATE, obviously it is kind of far out, but do we know when we could expect the interim data for that?

Yes. What we have said before is to expect -- to anticipate data in 2019.

Okay. Thank you. And then, for PSC, is this a first or second half 2017 that the data should be coming out?

For now, we are just saying 2017, but the study is fully enrolled and we announced that in September.

And just as a reminder, it is a six-month dosing period, and you need time to lock the data, et cetera. So you will definitely see it next year.

Okay. Great. And then, just lastly, in terms of off label, I know visibility is very hard right now as you guys just mentioned. But when can we expect this to get a little better, and do you guys see this as getting better anytime soon?

So I think we are a little bit confused around the table. Obviously, our organization is not promoting Ocaliva off label. As Richard mentioned to you, our system is even designed so you specifically only triage patients with a diagnosis of PBC.

So to the extent that physicians choose to do that off label, that would not go through our systems in any way, shape or form. So we are not going to be able to provide you with any type of visibility. We are not looking for it. It would not be appropriate or compliant.

That makes sense. Thank you very much.

Jim Birchenough, Wells Fargo Securities.

Just wondering if there is any further detail you could provide on screen failures either in terms of quantitatively, what that rate is, or just more qualitatively, what is contributing to the screen failures? Is there any variance between centers, and is there anything in terms of the actual procedure of obtaining the biopsy? That could be improved upon. Just trying to get a sense of that variable that might see some improvement.

Yes, Jim, I am not going to -- again, for competitive reasons, I am not going to disclose exactly what the screen fail rate is. But suffice to say, as I said a few minutes ago, it is fairly high, not unexpectedly.

And to the qualitative side of your question, yes, there are learning that we can take from screen fails. There are better and worse ways to conduct biopsies than not to get too into the details of how that works. But we are looking, again, for opportunities to improve all metrics in the study, and improving the screen fail rate is just one that could result in improved enrollment.

Joseph Schwartz, Leerink.

Quick follow-up question. Curious what percentage of new patient starts currently have gone through -- to date have gone through the Interconnect portal as opposed to not?

Yes. Joseph, good question. So, through the third quarter, the vast majority of patients went through Interconnect. So it is a new patient services hub really helping to -- help physicians get their patients through the system. We have had some learnings with it as well as we continue to increase our operations. But the vast majority of our patients through the third quarter went through Interconnect.

And does that trending upward or downward or staying flat over the -- at this point? Are you seeing those kinks that you are mentioning, are those leading to increasing, decreasing, or consistent rate at this point relative to the few months that you have been (inaudible)?

Just one of the things we have done very recently in October is our commercial co-pay card. So, as a reminder, for commercially qualified patients, they can actually have a $0 co-pay. We have just recently expanded that service to be available through our specialty network directly and also as has been through Interconnect. So that will likely impact some of the enrollment numbers in Interconnect going forward.

That's really helpful. And last part of that question, can you remind us of the criteria for qualifying for that co-pay assistance program?

Yes. I mean, they basically will go through a -- I mean, they have to be commercially insured patients. And as long as they are qualified, we can verify their insurance in general, and commercial patients will get a $0 co-pay. But only for the commercial channel at this stage.

Right. And there isn't any sort of -- like you will cap on income or verification process in that way? It would preclude somebody from receiving that co-pay assistance?

At this stage, no.

Okay. Great. Thank you.

Thank you.

Okay. I think that was our last question. We want to thank everybody for dialing in this morning, and we will be available for follow-up questions should you have them. Thanks very much.

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