Intercept Pharmaceuticals Inc (ICPT) 2017 Q3 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals 2017 Third Quarter Financial Results Conference Call. (Operator Instructions) Please be advised that this call is being recorded at the company's request, and a webcast of this call will be archived on the company's website for 2 weeks from today's date.

I would now like to introduce Dr. Mark Vignola, Intercept's Senior Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on today's call. This morning, we issued a press release covering our third quarter financial results and providing a business update, which is available on our website at www.interceptpharma.com.

Before we begin our discussion today, 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 our development programs for obeticholic acid, or Ocaliva; market estimates relating to the indications we are pursuing; and our regulatory, clinical and commercial plans, goals and estimates as well as other statements which relate to future events.

These statements are based on the beliefs and expectation 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 U.S. Securities and Exchange Commission, including the Risk Factors section of our most recent annual report on Form 10-K and in our 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.

OCA is an investigational product that has not has been approved for use by any regulatory authority in any indication other than primary biliary cholangitis, or PBC. No conclusion can be drawn concerning the safety or efficacy of OCA in those indications at this time.

The call will begin with remarks from our CEO, Mark Pruzanski; followed by those from our Senior Vice President and Head of U.S. Commercial, Richard Kim; our President of International, Lisa Bright; and closing by our Chief Financial Officer, Sandip Kapadia. We'll then open the call to take your questions. We'd like to note that there are slides associated with today's call that can be accessed via the webcast and on the Events section of our IR web page.

Let me now turn the call over to our CEO, Dr. Mark Pruzanski.

Thanks, Mark. Good morning, and thank you for joining us on today's call. I'd like to start by acknowledging the devastating storms and acts of terror we've witnessed over the past few months, and I'm grateful knowing that our employees and the physicians and patients we serve around the world have not been harmed. In the face of these events, Intercept remains resolutely focused on developing breakthrough medicines for patients with progressive nonviral liver diseases.

Today, we reported $40.9 million in third quarter Ocaliva sales in our marketed indication, primary biliary cholangitis, or PBC. While we're currently addressing the recently raised post-marketing safety concerns, we're confident that the benefit-risk profile of Ocaliva remains favorable and unchanged. And it continues to represent an important treatment option for the many PBC patients with an inadequate response to or intolerant of standard of care.

On the NASH front, coming off the AASLD Liver Meeting last week, we feel increasingly confident about the potential of OCA and our leading position in the field. Our flagship Phase III REGENERATE trial is on track to report the first pivotal data in NASH to support regulatory approval.

Now for some specific updates on the business. And first, our latest progress in PBC. Demand for Ocaliva in the third quarter showed continued growth. And we continue to view the long-term market opportunity as robust. PBC-treating physicians and thought leaders continue to provide us with positive feedback and support for Ocaliva. Richard and Lisa will provide a more detailed update on our U.S. and international launch performance later in the call.

Meanwhile, we've been in active discussions with FDA regarding an update to the Ocaliva product label and are optimistic we will have a finalized label by early 2018. As part of this process, our post-marketing safety data had been reviewed and adjudicated by independent experts. We feel reassured by the results of the adjudication process as well as additional safety analyses of our clinical study data, including over 1,300 patient years of exposure and epidemiologic documentation of PBC disease progression, all of which we've now shared with FDA. While we cannot today provide any further details pending resolution of the update to the product label, we continue to believe in Ocaliva's benefit-risk profile and the value it provides to patients in need.

Moving now to our NASH program. As we announced in May of this year, we completed enrollment of the interim analysis cohort of the Phase III REGENERATE trial, and we are reiterating our guidance of data for the interim analysis in the first half of 2019. Assuming a positive result, this trial will serve as the basis for expanding the use of OCA to NASH patients with fibrosis. With respect to our planned NASH Phase III cirrhosis trial, we remain on track to initiate it before year-end and plan to share details on the trial design shortly.

Finally, just last week, we presented results from the Phase II AESOP trial of OCA in primary sclerosing cholangitis, or PSC, at the AASLD meeting. We were thrilled to see AESOP recognized as a featured late breaker at the meeting and have been pleased with the excitement from the medical community about the results. With these data, we've established a clear proof of concept in a second cholestatic liver disease with no approved treatment. And this further underscores the potential of OCA in a broader array of progressive nonviral liver diseases with high unmet need. Based on the potential for OCA in PSC, we will be engaging with FDA in 2018, and we'll report back when we have determined appropriate next steps. As with PBC and NASH before it, we expect the process to determine what regulatory path is available in PSC to take some time.

I will conclude my remarks by saying that I'm very confident in OCA's potential. In short, the efficacy and safety profile of OCA is supported by the most robust evidence base in several progressive nonviral liver diseases. The Intercept team remains dedicated to our mission to bringing breakthrough therapies to patients suffering from these liver diseases and continuing to meet the challenges we face as the leader in the field. We continue to deliver global sales growth for Ocaliva in PBC and are advancing our leading Phase III clinical program for NASH, where there is tremendous unmet need. We are also building a pipeline for Ocaliva in other diseases with high unmet needs, including PSC and biliary atresia.

With that, I'll turn it over to Richard for the U.S. commercial update.

Good morning. As Mark mentioned, we're pleased with our performance in the third quarter. We achieved net U.S. Ocaliva sales of $36.2 million, which compares to $27.9 million in the second quarter of this year and $4.8 million in the third quarter of 2016. Also please keep in mind that this quarter includes a onetime $3.7 million benefit in deferred revenue following a change in revenue recognition that Sandip will discuss.

The third quarter showed steady demand growth over the second quarter. As anticipated, new patient demand softened slightly during the summer months. And we saw a small impact to our business due to hurricanes Harvey and Irma. Toward the end of the third quarter, we also experienced some additional softness in prescription following the Dear Health Care Provider letter and the FDA safety communication on Ocaliva.

New patient enrollments into Interconnect, our patient support program, and referrals to the specialty pharmacies have grown in September and October compared to December. However, the recent IMS data, which you can see on the supplemental slides posted on the website this morning, shows that just after the safety communication at the end of September, TRxs dropped. But over the last couple of weeks, prescriptions are in a more upward trend. We believe the drop is mostly driven by some existing Ocaliva patients delaying refills until they have an opportunity to see their physician. Our most recent weeks of data show refill rates rebounding towards the levels prior to the safety communication.

The safe and appropriate use of Ocaliva is always our priority. We believe that by making it a priority to reeducate physicians and other health care providers on the hepatic impairment dosing, that it helps to remind physicians to manage these patients with the appropriate caution while reinforcing the high unmet need in PBC. Our sales and medical teams have been proactively reeducating all of our target physicians as well as our PBC speakers on the adjusted dosing recommendation for hepatically impaired patients. Our teams have also made enhancements to Interconnect to further improve our vigilance for all patients, including patients with more advanced PBC. Through our medical and patient advocacy teams, we have made consistent communication with the PBC and liver patient advocacy groups to ensure that they have our latest insights.

We had thousands of face-to-face interactions and conducted [polls] research following the safety communication amongst our target physicians to get an initial reaction to these communications. The research shows that across all PBC patients, 80% of physicians will either maintain or increase their level of prescribing for Ocaliva. Specifically, for patients with hepatic impairment, 60% of physicians said that they will either maintain or increase their prescribing of Ocaliva. For this low response for use in the hepatic impairment patient, we see this as a good impact from our communication efforts. And as a reminder, these patients make up about 2% to 4% of the overall PBC population. Things are still evolving. But we feel good about the initial customer feedback and that the fundamental belief in Ocaliva as a treatment for PBC patients remains strong.

From a payer perspective, up to this point, we have not seen any changes to prior authorization criteria. As you can see, for the past couple of months, we have been intensely focused on the appropriate communications and actions around the safety communication. Our commitment to nonviral liver disease has never been more evident than right now. The conversations and feedback from our target physicians reinforces their long-term belief in how Ocaliva meets unmet need for PBC patients with an inadequate response or intolerant UDCA. And for us, we remain focused on the growth opportunity of PBC and the thousands of patients who may be in need of a new treatment option.

Thanks for your time. And now I'd like to turn the call over to Lisa.

Thanks, Richard. Good morning, everyone. Throughout 2017, we've been pleased with the tremendous progress and accelerating access to Ocaliva for patients outside the U.S.

For the third quarter, international Ocaliva sales were $4.7 million. As we had expected, sales continue to be driven predominantly by Germany and France. With the exception of Spain, where negotiations remain positive and ongoing, we have now obtained access of some sort for patients in all major EU countries and Canada within a year of regulatory approval, well ahead of industry norms. Finalization of outstanding national pricing and reimbursement in these countries should be completed by middle of next year.

Overall, there remains high interest and demand for Ocaliva. Our most recent research done in September suggest that in Germany, for example, more than 70% of our target PBC physicians have prescribed Ocaliva at least once, and over 80% of those physicians say they intend to increase the number of prescriptions in the next 6 months. So we're positive as we head into the end of the year.

With that, I'd 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, 2017. I'd like to take this opportunity to give you an overview of the Q3 results, our cash position as well as provide guidance for the balance of the year.

We've recognized worldwide Ocaliva net sales of $40.9 million for the third quarter 2017. Inclusive in the worldwide net sales is a change in estimates related to deferred revenue. The net effect was a onetime increase of $4.1 million in net revenues for the third quarter 2017. Prior to July 2017, we recognized revenues using the sell-through method. During the third quarter of 2017, we transitioned our revenue recognition from the sell-through method to the sell-in method as a sufficient period of commercial experience has occurred to enable us to reasonably estimate product returns.

For the quarter, U.S. net sales were $36.2 million, which includes $3.7 million for the change in estimates related to deferred revenue. For the quarter, ex-U.S., net sales were $4.7 million, which includes $0.4 million for the change in estimates related to deferred revenues. Gross-to-net remained constant in Q3 relative to Q2. Our GAAP operating expense for the quarter were $107.5 million, and non-GAAP adjusted operating expenses were $92.9 million for the quarter.

The increase in non-GAAP operating expense relative to Q3 2016 is primarily driven by personnel costs related to support our commercial and international initiatives and clinical development programs for OCA and infrastructure to support these programs. We also recognized $7.4 million of interest expense during the quarter from our outstanding convertible note offerings. We ended the third quarter with $492.7 million of cash, cash equivalents and investable securities on our balance sheet. This represents a reduction of cash of approximately $57.6 million during the quarter.

Finally, let me turn to our guidance for the balance of the year. While we are not providing specific sales guidance for Ocaliva, we would like to reiterate our expectation for steady sequential quarter-over-quarter growth through year-end. This would be net of the $4.1 million of onetime net revenue recorded in Q3. We expect gross-to-net for the year to be towards the lower end of the 10% to 15% range. We project our non-GAAP adjusted operating expense for the year will fall in the middle of the previously guided range of $380 million to $420 million. This guidance includes several onetime related expenses to the startup of our Phase III cirrhosis trial in the fourth quarter.

For the full year, we expect interest expense of approximately $30 million, which includes the amortization component from our outstanding convertible notes. We're also embarking on an effort to reduce our operating expense growth by streamlining our operations and reprioritizing programs to focus our resources on the ongoing commercialization of Ocaliva and the advancement of our clinical development of OCA in NASH. As part of that effort, we have decided to deprioritize our 767 development program for the foreseeable future.

Finally, as a reminder, adjusted operating expense is a non-GAAP financial measure. We anticipate stock-based compensation expense will represent the most significant noncash item that is excluded in adjusted operating expense as compared to operating expense under GAAP. Please refer to our press release for a reconciliation of our historical non-GAAP adjusted operating expense to GAAP operating expense.

I'd like to now turn the call over to Mark.

Thanks, Sandip. Before we open up the call for your questions, today we are announcing that Rachel McMinn will be leaving Intercept at the end of the year to pursue an exciting entrepreneurial opportunity in a therapeutic area that she is deeply passionate about. Effective today, Rachel will step down from her role as Chief Business and Strategy Officer. Between now and the end of the year, she will continue to play an important role at the company as a strategic adviser and is fully committed to supporting the company through this transition period.

I greatly appreciate Rachel's significant contributions to Intercept, which helped to accelerate our transition from a small company of approximately 50 people to a global commercial biopharma company during her tenure. We are fortunate to have had her leadership during a critical time in the company's lifecycle and wish her all the success in the next chapter of her career.

With that, I'll turn things over to the operator.

(Operator Instructions) Our first question is from Michael Yee of Jefferies.

Maybe for Mark, first question is maybe just characterize some of the regulatory discussions and progress that you've made, suggesting that you have a label change by early '18 as it relates to a focus on more Child-Pugh B and C severe patients versus perhaps what, if any, concern or commentary that would be in a label change as it relates to mild patients and what our expectation would be on that.

And then a second question is -- I don't know if Rachel is there but appreciate all her work. If she's there or for Mark, maybe as we came away from AASLD, obviously there were a lot of studies looking at biomarker endpoints or imaging endpoints such as PDFF. Maybe just comment as to how you would interpret some of that data, given you guys don't, as far as I'm aware, don't look at that data. You've got biopsy data. So how should we put those types of studies into context with your studies?

Thanks, Mike. So I'll answer the first question. And Rachel is here, so I'll let her take the lead on the second. So with respect to the label negotiation, as I said in my prepared remarks, we did follow up on our commitment iterated on September 25 call to select external experts to review and adjudicate all of the identified cases that FDA referenced in its safety communication and any others we could find in our PV database. That process has been completed.

And I just want to reiterate what I said, which is that we come away reassured by the findings of this process. That adjudication has gone into FDA, as has additional analyses of our clinical trial data and epidemiologic analyses on background event rates in the population. We're now in a very constructive dialogue with FDA about the label update. And as I mentioned, our hope is that we actually get to a final label, if not by year-end, then in early 2018.

Now with respect to your further question on different subpopulations of patients, what I can reiterate, and I've said before, is that the main goal here of the label update is to aid the average clinician looking after these patients in identifying patients at risk, primarily the most advanced and most fragile patients with Child-Pugh B and C cirrhosis, who need to be dosed in a different manner and also patients who are at risk of decompensation.

Michael, thanks for the question. In terms of AASLD and other endpoints, I'd say a couple of things. One is we did walk away more confident in our overall competitive position. If you look at some of the data that was either surrounding the conference or at the conference, particularly for the later-stage products that was or was not there, we do feel that OCA remains in a solid leadership position.

Specifically around the biomarker you mentioned, PDFF, keep in mind, that is a very good surrogate for hepatic fat. Unfortunately, fat though -- changes in hepatic fat have not been correlated in any way, shape or form with fibrosis improvements or longer-term outcomes. So relying on PDFF specifically to move forward as proof of principle could be fraught with significant clinical risk.

And then just, I guess, the final thing I would say is we are hearing that regulatory agencies, particularly the FDA, is looking for biopsy data in proof of concept studies. So it's unclear, some of these studies that are relatively short duration using novel biomarkers, it's unclear how that data will be interpreted by regulatory authorities in the overall clinical development program and proceeding into Phase III, for example.

Our next question is from Brian Abrahams of RBC Capital Markets.

Congrats on all the continued progress, and congrats to Rachel on your accomplishments there, and best of luck in the future. The first question for Richard, can you maybe describe in a little bit more detail the use patterns in the U.S. that you're seeing for Ocaliva beyond maybe some of the refill delays? Just curious if there's been any change in titration tendencies, any shifts away towards -- away from daily dosing in the milder, non-decompensated patients and whether there are any regions or patient types or physician settings where you see the most opportunity for education. And then I had a follow-up for Mark.

Brian, thanks for the question. So as far as the sort of patterns are concerned, I think the way I would describe it as per the statements is we did sort of see a bit of softness in the summer, and maybe prior to the Dear Health Care Provider letter and the safety communication, we're starting to see a bit of an uptick again. But what I would say is generally there's no real regional differences that we see across the country. We've seen actually pretty steady titration from 5 to 10 milligrams and a change in -- we've always been able [to see] daily and twice-daily dosings to our services. The proportions have stayed relatively constant over the last little while.

So I think it's maybe a little difficult with the small numbers of patients who are on those doses to make any hard, fast judgments on that. So I think it's going to continue to evolve for the next little while here. But we haven't really seen, what I would say, dramatic shifts as far as some of the patterns are concerned, maybe minus the refill pattern that I mentioned earlier.

Got it. That's very helpful. And then Mark, I was wondering if you could maybe expand a little bit on the deprioritization of 767 despite some promising early preclinical data. Is this just really a strategic prioritization for financial efficiency? Has there been any change to your thesis on TGR5 activity contribution versus pruritus association? And is there anything, maybe in earlier stage development, that could be as potent as 767 on FXR but perhaps without TGR5 that could serve as a potential lifecycle extension strategy?

Yes, thanks, Brian. Look, we continue to believe in the asset. But as you alluded to and we mentioned in our prepared remarks, we are looking to streamline OpEx and prioritize maximizing the value of OCA in-market and in its leading position in NASH and other progressive nonviral liver diseases. We will be exploring our options for 767 heading into 2018. Since you asked, we do have other compounds in the pipeline. There is one which is codenamed 787 that is a highly selective FXR agonist and shows a lot of promise. And that is being advanced, albeit at a preclinical stage.

Our next question is from Alethia Young of Crédit Suisse.

Maybe 2. I guess, one for Lisa, just -- have you seen any impact from kind of the Dear Doctor communication in the United States as it relates to Europe? And then also what kind of -- can you discuss what underpins your confidence around the NASH cirrhosis trial, like is there something particularly different maybe between the NASH cirrhotic liver versus the cirrhotic PBC liver. And Rachel, I wish you the best of luck.

Alethia, thanks for the question. So I mean, as Richard said, I mean, we've been continuing to do ongoing educational efforts around appropriate dosing as per the label for hepatic-impaired patients. Really the response from physicians has been pretty calm and pragmatic. I think they recognize the serious nature of this disease, and they recognize that a lot of these patients experience some rapid disease progression.

So I think what I'd say is that generally pretty calm, pretty pragmatic. The hepatic-impaired patients anyway are not predominantly the main group of patients that physicians are starting to try Ocaliva on. And as we've said in my kind of pre-prepared remarks, generally sales are pretty solid in all of our launch countries. And as we talked about, the intent to prescribe is very strong, even amongst those that haven't yet started. So yes, I think that that's a fair summary of where we're at.

Yes. And Alethia, with respect to the NASH cirrhosis program, we are confident in proceeding. As I mentioned, we're on track to initiate the study prior to year-end. We will be coming back shortly with details on trial design. You asked -- yes, I mean, a cirrhotic patient is obviously more advanced in their disease. And we will be going into compensated cirrhotics, where there is a significant unmet need. I don't know if there's another part to your question, though.

Well, I mean, just curious, like, because obviously [there would] be hepatic impairment in like PBC patients and the cirrhosis there. Is there any kind of notable difference between the cirrhosis that might occur in a NASH patient?

Well, look, I mean, first of all, it needs to be said that PBC and NASH are very different diseases. And you have different effective hepatic exposure of our drug as modified bile acid between a cholestatic disease like PBC and a non-cholestatic disease like NASH. We wouldn't predict any kind of meaningful difference in exposure in a compensated NASH cirrhotic versus a fibrotic NASH patient. But obviously, as you get to the most advanced decompensated patients, it's a different story. It's no surprise, many drugs that are dose-modified in very advanced liver patients. And we'd expect the same in NASH.

Our next question is from Ian Somaiya of BMO Capital Markets.

It's Steve on for Ian. I want to get your thoughts on pruritus and LDL elevations and how that's playing into physicians' decision to prescribe Ocaliva and also the impact on patient persistency and thoughts on differentiation, I guess, with competing FXR agonists that you could point to.

Sure. So I'll -- just a quick correction that in PBC patients, Ocaliva does not increase LDL. But I'll hand to Richard on the pruritus question.

Yes. Sure, Steve. So as far as pruritus is concerned, obviously it's part of the risk/benefit decision that any physician and patient go through. We've been very proactive around communicating this since the day of launch. So we haven't really seen it as a significant barrier to initiating patients. And we also have a lot of really great patient support services to really help patients and health care providers along with this as well, so -- and as far as persistency is concerned, we see our adherence generally aligning still to what we had seen traditionally with UDCA. Obviously, we'll have to [see] if there is impact from some of these delays and refills. But generally, we're still seeing very close alignment to what we saw with UDCA.

Yes. And then with respect to the second part of your question, other competing FXR agonists, the short answer is we just don't know. We've said before that the mechanism of pruritus is still unknown. It is theoretically possible that you could activate the receptor without seeing it. But until we see larger, longer-term studies in PBC and other patient populations, we're not going to know.

We have also stated that target engagement in both the GI tract and the liver, we believe, is absolutely necessary to see the kind of hepatoprotective effects that we've demonstrated in now several progressive nonviral liver diseases. And there have been several purely synthetic FXR agonists that have failed historically. And so it remains to be seen, depending on which FXR we're talking about -- which FXR agonist we're talking about, if any of these will be viable going forward.

Okay. And thinking about the decision to deprioritize 767, just curious if that's related to what you've been seeing in the real-world setting with Ocaliva and if there's an expectation that 767's profile wouldn't, I guess, be differentiated. And also is there anything about the profile that you saw maybe preclinically that would have read-through to other competing FXR agonists, whether it's the TGR5 agonism or its potency on FXR or anything else?

And then just quick, lastly, I was hoping you could clarify how frequently patients are monitored in the REGENERATE NASH trial, what the monitoring requirements are for liver injury. Just thinking about, I guess, a high bar for what a rigorous monitoring requirement might be in a potential label amendment.

Sure. So with respect to 767, as we've long said, based on extensive preclinical study in different animal models, different diseases, liver and non-liver, we have felt that 767 has a differentiated profile that looks superior to OCA. The decision to not -- I mean, we obviously don't have the clinical proof of concept data to substantiate that claim in patients. And the decision to deprioritize, as we mentioned, is, one, streamlining OpEx and really prioritizing our resources on our in-market asset and Phase III NASH asset OCA.

With respect to -- sorry, your -- the frequency of -- yes, that's right, in REGENERATE. So look, we have a number of ongoing clinical trials. As I mentioned on our September 25 call, we have committed to stepping up our vigilance, not only in the marketplace with Ocaliva in the PBC population, but also in safeguarding patient safety across our clinical trials. I can't comment on specific monitoring regime in a given clinical trial. But suffice to say that we feel good about our monitoring in our studies and safeguarding patient safety.

Our next question is from Ritu Baral of Cowen.

First question is on the mentioned enhancements to Interconnect monitoring for severe patients. Can you guys go into a little more detail on that and how that might either play into or avoid any even potential for a REMS with the label update? And then I have a follow-up.

It's Richard. Yes, so obviously, we can't really speculate as far as what will go on with our label or the FDA discussions. But as far as Interconnect is concerned, we have been capturing already, obviously, dosing initiation and titration for Child-Pugh B and C patients that differs from the weekly -- the daily dosing of non-advanced patients.

Enhancements that we're adding to Interconnect are mostly driven to have a clearer form on how to actually articulate that a patient does have Child-Pugh B or C status. And also we have our nurse coordinator and patient care coordinators having more education on how to outreach when there's less clarity on enrollment forms as well. So I think -- I feel pretty proud of the fact that we're going really well above and beyond. And the communication thus far has been really, really, I think, well received by the practitioners, knowing the vigilance that we've added there. So we're looking, in essence, just to have a couple tweaks to the form so that there's more -- even more prominence around reminding people how to actually capture a Child-P B&C patient.

And which are enhancements that FDA is aware of?

Well, so for what we do through our patient services when we do not actually submit -- mentioned our product specifically, we don't actually have to notify the FDA. But they're fully aware of all of our promotional materials and materials that actually support Ocaliva in the marketplace today.

Got it. And then my follow-up was if you saw any difference in behavior, whether we're talking the refill rates that you mentioned or physician prescribing behavior for Ocaliva now between the specialist community, the hepatologists, versus the community gastros, who I believe you guys have been reaching out to for the last 3 to 6 months. Insofar as you guys are, I guess, changing messaging or intensifying messaging, is there a difference between how you approach those 2 prescriber populations and the patient populations that are cared for by those prescriber populations?

Sure. That's a great question. So we don't really generally see a lot of overall differences in the patterns between hepatologists and gastros, and mostly because most of our patients are still treated by gastroenterologists, because there's just a whole lot more of them in the country. But I would say, generally, [the case goes with every HCCN] physician that we reach out to, we really want to make sure that they're very clearly focused on PBC, the disease and the progression and the impact of disease first.

What I would say in general is we probably spend a little bit more time on that with less focused community gastros than hepatologists. But our goal is to sort of take people on that journey and always focus on the impact of the disease first before we can get into the particulars of the product. So it's really been our commitment that we've made to really make sure PBC really is well recognized appropriately. And our commitment hasn't changed throughout everything that's gone on here as well.

Got it. If you guys could indulge me with one last question this time. It's for Lisa. Lisa, where do you see the next leg of ex-U.S. growth? You mentioned that European reimbursement discussions should wrap up by mid-year next year. Where to next, I guess?

Yes. So I mean, we have, as we said, made really good progress with respect to our pricing reimbursement across the EU5 and Canada. Of course, as you'll know, securing national pricing reimbursement is kind of the first step. Most of these countries, we now have to discuss access at a regional-type level. So that's kind of really going to be the next major focus for us in, obviously, some of the smaller countries out across Europe.

And then outside of that, we'll work on a country-by-country basis, where we see there being an opportunity. So I think as I've mentioned on the last call, for example, we filed in Israel, and we'll continue to look at markets on an individual-by-individual basis. But our focus right now is really just cementing a really strong launch based on the good progress we've been making with national pricing and reimbursement.

Our next question is from Ying Huang of Bank of America.

It's Aspen on for Ying. So have you guys seen any impact from -- or on REGENERATE improvements since the FDA safety communication? For example, do you have to ask every patient in the trial to consent again after reviewing the latest safety information? And has the monitoring protocol in REGENERATE been updated, given the safety issues as well?

So we don't comment on recruiting rates in ongoing clinical trials. But I did mention on our September 25 call that we have well over 1,300 patients randomized to REGENERATE, making it not only the leading NASH Phase III trial but also by far the largest. We continue to feel confident that the trial is on track with projected readout of the interim analysis in the first half of 2019. And I think just another part of your question or...

Yes. I wanted to ask if the monitoring protocol for REGENERATE had been updated, given the new communications?

Yes. As I mentioned a couple of minutes ago, we've taken the opportunity to step up vigilance across all of our clinical trials ongoing.

Our next question is from Jay Olson of Oppenheimer.

I guess, just to follow up on the Ocaliva label revisions, is there any color you can provide on the gating factors that would lead up to the label revisions? Is it just a matter of the FDA reviewing all the additional analysis and data that you've provided? Or do you expect an FDA Advisory Committee meeting? And then I had a question for Sandip.

We have no indication of an advisory meeting. As I mentioned, we are in a constructive ongoing discussion with the agency about the label update. We have provided them with all of the information I mentioned in my prepared remarks. And we feel good and confident about the benefit-risk profile of our drug remaining both favorable and unchanged. So the expectation is that through this discussion with the agency, we'll align on appropriate update to the label and get that finalized, if not by year-end, then early next year.

Okay. And then just for Sandip, I was curious about the comments made about the objective to streamline and stabilize the growth of operating expenses. Can you just talk about maybe what some of the factors are behind that objective? And is there any goals you could share with us in terms of operating expense growth? And then also I wanted to wish all the best to Rachel.

Thanks for the question. As I mentioned, I mean, I think, look, we're embarking on a process to just reduce our operating expense growth as we go further into next year. We're not in a position at this point to provide guidance to you. We're -- our objective is to streamline operations, prioritize programs, just as any company would generally do overall. So I mean, it's basically just as our company has become -- because we have more and more programs now as an organization, we just need to have a more prioritized focus on things.

Our next question is from Andrew Berens of Morgan Stanley.

Maybe 2 questions. I just wanted to ask, at The Liver Meeting, there was a concern circulating, that investigators had to phone the REGENERATE and COBALT enrolled patients and then inform them of the safety issues and also offer the opportunity to drop out of the trial. So I'd like to ask whether that was actually the case in either trial. And then I know you said you wouldn't talk about enrollment rates, but has there been a dropout increase after that communication? And then also I do have a question on the NASH cirrhosis trial.

Andy, I didn't catch the entirety of your question, but -- you're talking about dropout rates in [303] in the REGENERATE trial?

Well, in either REGENERATE or COBALT, we had heard that the investigators had actually phoned patients that were enrolled in the trial and tell them about the safety communication and then offer the opportunity to drop out of the trial. So I was -- I wanted to confirm whether that was the case. And have you seen an increase in dropouts in either trial?

Yes, I mean, look, Andy, as I mentioned a couple of minutes ago, we have stepped up vigilance on patient safety across all of our programs. I'm not going to comment on specifics in any ongoing trial. But as we've said, we remain very confident that REGENERATE is on track. With respect to patient enrollment, we're right now actively enrolling the outcomes cohort of the study, having already back in May fully enrolled the interim analysis cohort that's on track to read out in the first half of '19. Second part of your question? Oh, you mentioned a NASH cirrhosis question.

Right. And I'd wanted to see -- at this point, you guys obviously have an IND in place. And does the FDA have a role in whether or not that trial starts? Do they actually have to endorse the start of that trial? Or is that completely up to the company?

No, obviously, it's a function of discussion with FDA about any such trial. And as I mentioned, we'll be coming back shortly with the details of the trial. We will be initiating it prior to year-end.

Our next question is from Alan Carr of Needham & Company.

Sandip, I wonder if you could clarify a bit about the OpEx guidance for this year. You mentioned that it looks like it's going to pick up quite a bit in the fourth quarter. I was wondering if that's entirely due to the cirrhosis trial. And can you clarify that -- I believe you said that was some sort of onetime increase. And I just want to get a sense of whether some of that would spill forward into '18 if the trial continues. And then also another one around the impact of the warning letter. Is there a similar review process underway with the EMA over some of the events that reported here in the U.S.?

No. Thanks for the question. I mean, look, I think we are generally comfortable with the guidance that we had provided previously from $380 million to $420 million. What we basically said was, "Look, at this point, we see us coming in the middle of that range." And I did mention that there would be, in the fourth quarter, some onetime expenses as you sort of start up a major Phase III program. So I think that that's something. At this point, I'm not really in a position to provide more guidance for 2018. I think we'll -- that's something that we'll certainly follow up at the right time. But the key driver for the fourth quarter was effectively some of those costs.

Okay. The second question, I mean, obviously we're in regular conversations and discussions with the regulators in Europe and Canada. We've clearly been sharing with them the work that we've been doing to continue to educate around the appropriate use as per the label. At this stage, we've not been asked to make any changes to the label. And I think what's probably important to know, of course, is in Europe, there's an additional monitoring in any case for any new treatments that's effectively supported by what we call a black triangle designation, which encourages reporting of any suspected adverse events, which allows them to be swiftly evaluated and assessed. So at this point, we've not been asked to make any changes.

Alan, just to -- maybe to briefly follow up, as you also think about 2018, as I mentioned, we're also on a process to reduce our operating expense growth overall. So that's something that we'll certainly be doing as we go into 2018. So -- but right now, like I said, I can't really provide further guidance. You just want to keep that in mind as well.

Our next question is from Joseph Schwartz of Leerink Partners.

This is Dae Gon dialing in for Joe. Two quick ones. So just following up on the previous question on the EMA review process. Can you actually provide us with an exact date of when that meeting occurred, where the EMA said no change to the label needs to be made?

And also on the second question, following up on the AASLD presentation for AESOP trial, I know you previously mentioned that the ALP reduction is necessary but not sufficient as an alone endpoint. So has there been any further update from the FDA or EMA in terms of what could sort of compound the ALP reduction for a Phase III pivotal trial?

Sure, I'll take both questions. We can't comment on specific timing of regulatory correspondence. But suffice to say that, as Lisa mentioned, EMA is not requiring the letter go out. With respect to AESOP, yes, we do believe that alk phos will be necessary but likely insufficient to support a regulatory path forward to approval. My understanding is that a paper will soon be published detailing the results of the discussion of the FDA-hosted endpoints workshop in PSC that was held early last year. But as I mentioned in my prepared remarks, again we're pioneering now a third indication here. It's going to take some detailed dialogue, we believe, with FDA to arrive at an appropriate path forward.

Our next question is from Joel Beatty of Citi.

The question's on Ocaliva and PBC. Could you discuss the opportunity for further sales growth among physicians who are already high prescribers compared to physicians who are lower or not prescribing it yet and how that's affecting the focus of the sales force?

Joel, it's Richard. Yes, thanks for the question. So as far as continued growth is concerned, so I would say generally in the initial parts of our launch, we have seen patients very much align to the POISE criteria as the largest population of patients treated out there right now. Our label allows us to be used obviously in patients who have an inadequate response or intolerant UDCA, which is not defined by a specific alk phos level. So we know that there are lots of patients, even in the (inaudible) of high treaters who have probably slightly lower alk phos levels. So we still see a lot of growth opportunity in those offices who jumped on Ocaliva quite quickly.

And then beyond that, we know that this whole marketplace has really been a bit of a inch-deep, mile-wide phenomenon. And we are actively looking at ways to continue to expand our impact in a broader target audience as well. So we feel good about our opportunity to go deeper within those who already have experience in Ocaliva and still gain and garner new treaters to come into the mix as well.

The next question is from Liisa Bayko of JMP Securities.

All my questions have been answered.

Our next question is from Jim Birchenough of Wells Fargo Securities.

This is Yanan in for Jim. First question, on the NASH cirrhosis trial, and specifically on potential thoughts about dosing. I know you wouldn't talk about the study design and the exact dose levels to be used. But could you share some of your thoughts on -- in terms of the dose to be used in these patients and how you think about it? Because obviously in PBC, the dose in liver impaired patient is once weekly versus once daily. So that's a big difference. In the NASH cirrhosis trial, what would your thinking process be for dosing?

Well, thanks for your interest in the NASH cirrhosis study. As I mentioned, we will be coming back shortly with details on the trial design. So I'm not going to talk about specific dosing questions today. I do want to say, though, that with respect to your reference to PBC and hepatically impaired patients specifically, again completely different disease, number one. So you have very different effective dose exposure in the liver of a PBC patient versus a NASH patient. And then also with respect to the phase -- upcoming Phase III NASH cirrhosis study, it will be in compensated cirrhotics, with no or perhaps at most mild hepatic impairment. So again, very different from the patients with decompensated, significantly more advanced end-stage disease.

That's very helpful. And another question is on the discontinuation rate for Ocaliva in PBC patients. I know you commented on persistence, which is similar to URSO. Just thinking -- looking at the script level, prior to the safety letter, the level seems to have stabilized somewhat at the 400 scripts per week level. And given that new patients are coming in -- were added every week, it seems like there's some kind of discontinuation, stable discontinuation. Could you comment on whether that is similar to URSO as well, to the historic URSO discontinuation rate?

Yes. No, it's a great point. So I would say generally what we see is consistency with URSO. With the exception of the last couple of weeks, I did mention earlier in the prepared remarks that we have seen a higher rate of refills not occurring as quickly as we would normally see. Generally, what we're hearing through our services and from some patients directly is some patients who have delayed are waiting to see their physician before they reinitiate. And as you know, sometimes you can't get into see a specialist right away. It might take weeks. And in some cases, it could take months to get back to the office. So I think some of this will sort its way out.

But I think one of the things that's important that we have heard in general as well from the physicians is fundamentally the overall belief in the product still. So I think time will sort of sort some things out here. But I also do think it will take some time for some of these patients to get back and see their physicians as well.

Our next question is from Brian Skorney of Robert Baird.

I guess on the September call, in the discussion around the 5 patients with liver assays that did not have hepatic impairment, there was some discussion around 3 of the patients. I think Dr. Flamm said that he believed 2 of the patients weren't actually PBC patients. I was just wondering if, A, that -- whether or not you guys got confirmation of that, whether or not those 2 of those 5 cases were PBC patients at all. And then I think there were 2 other cases that you had stated that there really wasn't any information on at that time. I was just wondering if you had uncovered any information and given any details on those 2 patients.

Yes. Thanks, Brian. Look, I think that the details you're alluding to just underscores again just how fraught it is to look at these post-marketing cases being reported into the company into the FAERS database. There's a lot of complexity here. Each case requires very careful follow-up and adjudication. As I mentioned in my prepared remarks, we've completed now an external expert adjudication of these and other cases. And we come away quite reassured with the findings of these experts that have now been reported into FDA and reaffirm our belief in the benefit-risk of our drug. Not today going to go back into individual cases, we'll come back to you at the appropriate time once the label update's been finalized. And we'll talk to you in more detail then about where we came out.

At this time, I'd like to turn the call to Mr. Pruzanski for closing remarks.

Yes. Thanks, everyone, for listening in today. I just want to leave you with the message that going forward, we remain laser-focused on optimizing the PBC launch of Ocaliva worldwide and advancing our leading Phase III NASH program that's on track for first data readout in first half '19 and expansion of our label for OCA in NASH, and then, of course, a focus on other progressive nonviral liver diseases, like PSC and biliary atresia. We'll look forward to coming back to you next earnings call.

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