Intercept Pharmaceuticals Inc (ICPT) 2018 Q1 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals First Quarter 2018 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 Executive Director of Corporate Development and Investor Relations. Please go ahead.

Good morning, and thank you for joining us on today's call. This morning, we issued a press release announcing our first quarter 2018 financial results, which is available at our website at www.interceptpharma.com.

Before we begin our discussion, I'd like to note that during our call and question-and-answer session today, we will be making certain forward-looking statements, including statements regarding the progress, timing and results of our clinical trials including our clinical trials for the treatment of NASH, the safety and efficacy of our approved product, Ocaliva, the potential approval of OCA and indications other than PBC, the timing and potential commercial success of OCA and other product candidates we may develop and our strategy, future operations, future financial position, future revenue, projected cost, prospects, plans, objectives of management and expected market growth. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call, and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. Some, but not necessarily all, of the factors that could cause our actual results to differ materially from our historical results or those anticipated or predicted by our forward-looking statements are discussed in this morning's press release and our periodic filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2017.

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

Today's call will begin remarks from our CEO, Dr. Mark Pruzanski; followed by those from our President, U.S. Commercial and Strategic Marketing, Richard Kim; our President International, Lisa Bright; and our Chief Financial Officer, Sandip Kapadia. We'll then open the call to take your questions.

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

Thanks, Mark. Good morning, everyone, and thank you for joining us on today's call. We accomplished a great deal in the first quarter of this year and are making good progress against the goals we have set for the company. We have several critical achievements during the first quarter, highlights include the following: Today, we reported $35.2 million in Q1 2018 worldwide Ocaliva net sales; and we continue to drive the launch of Ocaliva across our approved markets, which today include the U.S., Europe, Canada and Israel; we completed the label update for Ocaliva in the U.S., reinforcing appropriate dosing in PBC patients with Child-Pugh Class B or C or decompensated cirrhosis; and we announced our Phase III REVERSE trial evaluating the efficacy and safety of OCA in NASH patients with compensated cirrhosis.

Additionally, just after concluding the quarter, we successfully raised gross proceeds of $272.5 million in a public offering and concurrent private placement of our common stock to support our working capital and ongoing commercialization and development program investment requirements. We were really pleased to get the support of those close to the company, including several of our board members and other large shareholders, myself included, who together contributed more than $100 million of this raise.

Last, we are coming to you after a strong showing at the EASL meeting just last month in Paris, where several important OCA abstracts were presented. As we look ahead, there are 2 key priorities we will continue to focus on this year, growing our PBC franchise and reinforcing our leadership position in NASH.

Now some more detail on our PBC commercial effort. As you know, in February, we announced an updated U.S. label for Ocaliva and more recently a harmonized label in the EU, reinforcing appropriate dosing in PBC patients with Child-Pugh Class B or C or decompensated cirrhosis. These patients are at a very advanced stage of their liver disease, and we believe represent approximately 2% to 3% of the overall PBC population. Of course, we have been and will continue to educate physicians and the patient community on the updated label. And we are now refocusing our efforts to address the extensive unmet need in the PBC population eligible for Ocaliva treatment and are confident in the opportunity to return to growth.

Consistent with this, today, we are pleased to provide guidance of $170 million to $185 million in net Ocaliva sales for 2018. And Richard and Lisa will be providing more detailed updates on the U.S. and international businesses shortly.

Moving now to our work in NASH. Our comprehensive Phase III NASH program includes the REGENERATE trial in patients with advanced fibrosis and the recently announced REVERSE trial in patients with compensated cirrhosis.

As you know, REGENERATE is our flagship NASH fibrosis trial. FDA designated OCA, a breakthrough therapy in this population, based on it being the only investigational therapy thus far to have shown efficacy in all key histologic features that underpin the 2 currently approvable end points, namely NASH resolution and fibrosis improvement.

As a reminder, REGENERATE is designed to readout on an interim analysis supporting initial regulatory approvals, with continued follow-up for confirmation of benefit on clinical outcomes on a post-marketing basis. We remain on track for the top line readout of data from the interim analysis in the first half of 2019.

Our Phase III REVERSE trial is designed to evaluate the efficacy and safety of OCA in over 500 patients with a biopsy-confirmed diagnosis of compensated cirrhosis due to NASH. We designed this study to focus on the patient population with compensated cirrhosis, where we have confidence in OCA's potential to reverse disease course. The reversal of cirrhosis to an earlier stage of fibrosis is associated with very significant reduction in the risk of liver failure and all-cause mortality. We remain focused on enrolling REVERSE, with the expectation that positive trial results would serve as the basis for regulatory approvals worldwide and be supportive of broader market access in our NASH launch.

With REGENERATE and now REVERSE, we've expanded our leading NASH Phase III program, which is based on a strong foundation of the most robust safety and efficacy data of any investigational NASH therapy in development.

A quick note on the broader cholestasis development program. As we reported in March, we are engaging with FDA this year to define the path forward in primary sclerosing cholangitis, or PSC, a devastating autoimmune cholestatic liver disease with no approved therapy. As with PBC and NASH before it, we expect the process of defining an appropriate regulatory path to take some time and we will update you on our plans later this year.

Finally, we recently came off a very successful Annual Meeting of the European Association for the Study of the Liver, or EASL. We were pleased to present a late breaker on the results of a liver biopsy based sub-study from the POISE Phase III trial suggesting that long-term OCA treatment in patients with PBC is associated with reversal or stabilization of fibrosis and cirrhosis. After 3 years of treatment with OCA, the majority of patients, 11 of 13 improved or maintained histologic fibrosis stage. Notably, of the 4 patients with cirrhosis at baseline, all showed reversal by at least 1 stage and 3 improved to fibrosis without cirrhosis.

This is an encouraging finding because it further supports the clinical relevance of the biochemical improvements that predict OCA's impact on disease progression and clinical outcomes in a high-risk segment of the PBC population predicted to advance to liver failure, and absent to a liver transplant, potentially death. The data are also supportive of the previously reported anti-fibrotic benefit demonstrated in NASH patients in the FLINT trial.

A second POISE abstract demonstrated the safety and durability of OCA's treatment response in PBC patients, treated for 48 months in the ongoing open-label extension phase of the trial. These long-term data are important given the need for sustained benefit and tolerability with chronic administration.

Finally, TARGET PBC presented the first real world data in PBC patients receiving Ocaliva in the post-marketing setting, with confirmation of the beneficial effect of our therapy consistent with that demonstrated in our development program.

We had other important abstracts at the meeting, including one underpinning the safety of OCA in NASH patients with fibrosis and cirrhosis and came out of EASL reminded of the strength of our competitive position based on the robustness of our clinical data as the leader in progressive nonviral liver disease. Our medical affairs team is now focused on driving broader scientific communication of our exciting new clinical data.

I'll conclude by saying that we look forward to continuing to drive growth in our PBC franchise and remain very focused on our Phase III NASH program and defining a path forward in PSC and other indications. Liver patients with limited treatment options are at the center of everything we do at Intercept, and we continue to work and innovate for their benefit.

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

Thanks, Mark, and good morning, everyone. We reported $28.5 million in net U.S. Ocaliva sales for the first quarter, down from the fourth quarter in 2017, reflecting relatively flat Q1 prescriptions and a higher gross-to-net as we see across the industry to start the year.

The first quarter was a key transitional one for us, driven by the FDA's update of the Ocaliva label in February. While our team has been engaged with physicians regarding the importance of correctly dosing Ocaliva in PBC patients with Child-Pugh Class B or C or decompensated cirrhosis in September, the updated label itself marked a crucial step in rebuilding confidence and clarity with our stakeholders.

As we have moved out of the first quarter, we are excited that our conversations can now focus on the unmet medical need in PBC and what Ocaliva can bring to patients with an inadequate response or who are intolerant to UDCA.

We did see softness in our sales to start the year, both prior to the label update and for a period of time afterwards. However, as the quarter progressed, we observed a general stabilization in our IMS TRxs. And most recently, we're starting to see some lift in new patient initiation and TRxs are also beginning to build.

While we'd like to see our prescription trends return to the slope we had last year, based on our knowledge of the PBC market, we know that this will take some time to realize, given patients generally see their physicians approximately every 6 months or more.

For about half a year, we focused our communications on safety and label updates and now we're moving to a new phase and believe we have a solid foundation to move forward because the fundamental belief in Ocaliva remains very strong.

Based on Pulse Research conducted at the end of April with 50 PBC treaters, both Ocaliva prescribers and non-prescribers, 94% said that they intend to prescribe Ocaliva to their PBC patients within the next 6 months. In addition, over 4 in 5 physicians believe that they have the right information to prescribe Ocaliva. While positive, the research indicates that there are still some physicians who need additional information before prescribing. And that is a key responsibility for us to address.

These data are encouraging and consistent with the feedback that we receive from our sales team. This reflects our belief that physicians see the inherent value of Ocaliva for their PBC patients.

Now it is this fundamental belief that set the stage for important changes we have implemented to our sales model to increase physician coverage. We have expanded the number of sales representatives or Territory Business Managers and added a contract sales team to augment our efforts.

All of our teams are now actively calling our physicians, and we have completed the training and deployment of our contract sales team. That said, this was a significant change for our selling model and it does take some time to see the impact. But we use the transitional first quarter as a time to complete and expedite our changes. With this evolution, we have effectively increased our customer coverage by about 50%, which will allow us to reach more physicians who are seeing PBC patients.

Following FDA review, we now have our full complement of promotional materials and programs in the field. We refined our messaging to further support both disease and brand communications.

To conclude, this quarter, we have executed many important enhancements that we believe position us for long-term growth. There are still many eligible patients that we believe will benefit from Ocaliva, and our commitment to supporting people living with PBC and the physicians who treat them has never been stronger.

Thank you for your attention. And now I'd like to turn the call over to Lisa.

Thanks, Richard, and good morning. With over a year behind us since regulatory approval in the EU and Canada, we're encouraged with our international launches. Following rapid pricing and reimbursement across most of Europe, including Spain earlier this year and private coverage in Canada, we're beginning to see the impact of the sequential launches.

In Q1, international Ocaliva net sales were USD 6.7 million. The majority of sales continued to be in Germany and France, however, both Canada and the U.K. are now also making meaningful contributions.

Over the last few months of last year, we were focused on proactively reinforcing the importance of appropriate dosing in patients with hepatitic impairment in line with the SMPC. In February this year, following discussions with the EMA, we mailed the Dear Health Care Provider letter to over 67,000 physicians and pharmacists in Europe to further communicate this, and we continued to outreach through our medical and commercial teams. In parallel, the EU label has been updated and is now available on the EU Commission website. Altogether, this appears to have provided good reassurance and will be an important step in providing confidence and clarity.

So whilst it's early days, we are optimistic about our international growth this year and I'd like to provide a few more details. Our most recent market research conducted from November last year to January this year suggest that 85% of current prescribers intended to prescribe more Ocaliva in the next 6 months. This reinforces what we hear anecdotally that physicians prescribing Ocaliva are getting good results with their patients. And in fact, since December, we have seen a significant increase in new prescribers across the EU and Canada, reflecting not only the impact of new country launches, but also an increase in the breadth of prescribing. Consequently, we've seen new patient growth in the first quarter.

In our market research, amongst our target current prescribers who haven't prescribed yet, over 60% intend to start prescribing in the next 6 months. And we also continued to identify other important prescribers outside of those main centers. Finally, in Canada, we expect to gain public reimbursement in the summer and, therefore, expand patient coverage beyond the current 40% of those who are covered by private insurance.

So in summary, our commercial and market access teams are doing a great job executing on our ongoing launches, and our international region should make a meaningful contribution to our global growth for this year.

And 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 our financial results for the quarter ended March 31, 2018. I'd like to take the opportunity to give you an update on our Q1 2018 results, our cash position and provide financial guidance for 2018.

We've recognized $36 million in total revenues in the first quarter of 2018, including $35.2 million of Ocaliva net sales. Ocaliva net sales comprised of U.S. net sales of $28.5 million and ex U.S. net sales of $6.7 million.

As you heard from Richard and Lisa, Q1 was a transitional quarter with the label update and can serve as a good basis for future growth. As we expected, based primarily on the impact in the first quarter of increased gross-to-net deductions related to annual resetting of deductibles and Medicare Part D coverage gap, total gross-to-net deductions for the quarter were towards the higher end of our previously communicated 10% to 15% gross-to-net range.

Our GAAP total operating expense for the quarter were $111.4 million. And our non-GAAP adjusted operating expense, which excludes stock-based compensation and depreciation, were $97.8 million.

Our cost of sales for the quarter were $0.3 million. As previously discussed prior to the FDA approval of Ocaliva, we expensed costs related to the manufacturing and buildup up of Ocaliva commercial launch supplies. As a result, we expect our cost of sales to remain negligible until the previously expensed supplies of Ocaliva are sold.

We also recognized $7.5 million of interest expense for the quarter related to our outstanding convertible notes.

Moving on to our cash position. As of March 31, 2018, we had cash, cash equivalents and investable securities available for sale of approximately $326.1 million. Subsequent to the end of the quarter in April 2018, we completed a public offering and concurrent private placement of our common stock. We received net proceeds from the offering of approximately $261.4 million, after deducting underwriting discounts, commissions and estimated offering expenses of $11.1 million.

And finally, moving on to our 2018 financial guidance. Based on our transitional first quarter results and our outlook for the remainder of the year, we're announcing 2018 Ocaliva net sales guidance range to between of $170 million and $185 million. We continued to expect gross-to-net for the year to be in the 10% to 15% range. In addition, we are confirming our previously announced 2018 non-GAAP adjusted operating expense guidance range between $390 million to $410 million.

For the full year, we expect interest expense of approximately $30 million, which includes both the cash interest and amortization components for our outstanding convertible notes.

Finally, as a reminder, non-GAAP adjusted operating expense is a non-GAAP financial measure under SEC regulations. Please refer to our morning's press release for an explanation and reconciliation of this measure.

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

(Operator Instructions) Our first question comes from the line of Brian Abrahams from RBC Capital Markets.

I guess, my first question I wanted -- was I wanted to drill down a little bit more on the financial guidance. If we sort of assume some modest growth in scripts throughout the year and an adjustment for gross-to-net in the second quarter and beyond for seasonality. It still would sort of bring one to the low end or below of your guidance. So I was wondering if you could maybe talk a little bit more about the elements underpinning that? And how we should be thinking about that? Is it -- were there any inventory effects that we might see revert in the next quarter? Might we start to see greater pickup in European contribution with things like Canadian reimbursement? And I guess, when do you expect we might start to see the pull-through in U.S. scripts from the new selling approach?

Thanks, Brian. I'll ask Sandip to start and then hand over to Richard.

Thanks. Thanks, Brian. I think -- just look, as Richard mentioned, I mean, Q1 is a bit of a transitional quarter for us. We're getting good general feedback from customers on the updated label. We've increased resourcing, as Richard had mentioned, in terms of -- in the U.S. field force. We're seeing good encouraging trends in the U.S., and I think we continue to believe in the long-term opportunity. At this point, what I would say is, I mean, we will continue to update you as in future calls as we get better information on the [guidance]. This is the first time we're giving guidance. We want to make sure that we felt -- and we feel good about what we've provided. And Richard, may be you can probably comment on the U.S. a little bit?

Yes. Sure, Sandip. And Brian, obviously as Sandip said, Q1 was a transitional quarter for us. And obviously, we went through some very significant important market events that really did affect our launch. But we do really believe we can use Q1 as sort of our new baseline for our foundation for growth. And as you probably have seen in IMS trends, we started to see more stable and higher baseline than we had seen in quite some time. So as we said, it's kind of hard to predict exactly how long all of our efforts will actually take to impact, but we remain very confident that the patients are out there and fundamental belief in the product, Ocaliva, is really high with our physicians as well.

Got it. That's really helpful. And then maybe just one follow-up question. Obviously, very compelling POISE data that you reported at EASL. Can you talk a little bit about the physician receptivity that you saw at the meeting, the degree to which you can kind of leverage that data to may be win over additional prescribers who may not yet fully recognize the potential benefits of Ocaliva? And then, how should we think about read throughs from a mechanistic basis to fibrosis and NASH, obviously different diseases, but are there key overlaps in pathophysiology such that we can interpret that -- the POISE data as really confirmation of what we might see in REGENERATE and the other NASH studies?

Yes, Brian, I'll take that. So the physician feedback has been that the data are very, very positive. Granted, it's a relatively small number of patients, but as you know, biopsy is not standard of care in PBC and it's actually difficult to obtain biopsy, therefore, in this population. We're really gratified to see that the large majority of patients who did undergo repeat biopsy did show reversal or at least stabilization of their fibrosis. And as I mentioned in my prepared remarks, this is -- you got to remember that this is already a high-risk segment of the population based on natural history data -- published natural history data. It's a group of patients who would be expected to continue to progress histologically to cirrhosis and ultimately to liver failure. So the physician community, I think, is very encouraged on this. And I mentioned also, our medical affairs team is moving to appropriately disseminate the data with a view to publishing it. I think the second part of your question in terms of read through. And again, we have fundamentally believed that FXR is an optimal receptor to target in -- across the spectrum of liver disease. This is the second time that we've shown evidence of an anti-fibrotic effect after, of course, the FLINT data and it gives us a lot of encouragement. Therefore, in the observation that OCA is in fact directly anti-fibrotic irrespective of disease etiology. We'll learn soon enough first half '19 when we turn the REGENERATE card over. And hope to confirm then, again, what we saw in FLINT. So overall, very encouraging data from our perspective.

Our next question comes from the line of Jay Olson from Oppenheimer.

Did you say in your prepared remarks that you would use the REVERSE trial to support your sNDA filing for NASH?

What we said was that the results of that trial we anticipate, assuming they're positive, should support broader market access in the NASH cirrhotic population and also regulatory approvals.

Okay. So is that mean that you need the results of REVERSE before you can...

No, not at all, not at all. Our intention -- assuming that REGENERATE results are positive first half next year, our intention is to file on REGENERATE for approval.

Okay. And then, just a follow-up on the fibrosis data in PBC that you presented at EASL, congrats on that data. Do you plan to try to get that data once it's published into the Ocaliva label? And would you expect that to be a driver of script growth in PBC?

I'll let -- well, actually I'll answer that. No, I mean, at the current time, we wouldn't necessarily anticipate that this would get into the label. However, as you mentioned, we do intend to publish it.

Our next question comes from the line of Alan Carr from Needham & Company.

One, can you clarify where you are in terms of which countries that you have reimbursement arrangements? And outside the U.S., where you are now? And which ones you expect to get later this year? And then, also PBC in the U.S. Are you -- I'm wondering if you attribute 100% of the slowdown to the FDA warning last year? Or is it demand a little weaker overall because prevalence estimates or that unmet need may not be as great as you think. What you're thinking on that?

Thanks, Alan. Lisa, I'll ask you to take the first part of the question.

Yes. Okay. Thanks, Mark. Thanks for question, Alan. So of course, across the major countries we've talked about just a little bit before, we have pricing and reimbursement at national level now in the U.K. In Italy, in Germany, in Spain and, of course, in some of those countries, we still going through the process of regional reimbursement. So it takes a little bit of time sometimes for it to work its way through to individual hospitals, but we are making very good progress. A good example of that would be in Italy. Even though we got approval just at the back of the year for pricing and reimbursement, we already have access to about 80% of the patients in Italy. We also have reimbursement in some of the smaller European countries such as Norway, Portugal and, of course, as I mentioned early, we have access to the private market in Canada today, which represents about 40% of patients who are covered. So the big opportunity for us as we kind of move into back of the year is obviously to continue to get local pricing and reimbursement in those countries where it's not already there. And of course, we talked in our prepared remarks about the opportunity for us to get public coverage pricing reimbursement in Canada, which we expect will be towards the end of the year -- there [somewhere] onwards.

Next is then Richard on the second part.

Yes. Alan, to say the slowdown was 100% due to label, I think is hard to say, but I would say the vast majority. And if we -- the way we think about it is, we had a very significant event of communications very early on in our launch ramp up here. So it has taken some time to sort of move forward from that. However, when you think about the unmet need, the unmet need that we hear is absolutely still there. And the -- as far as the patient numbers are concerned, we absolutely see the confirmation of the patient numbers that we have been seeing before. I think the ones which, to our new model is the patients are diffuse. As we know there is not many offices that have dozens and dozens of patients. That's one of the fundamentals of our sales force evolution. But I think the most fundamental principle that I'd come back down to is where we were at launches. We've introduced a new therapy in the space, where nothing new has happened for over 20 years. It does take time to continue to [blanket] communication. We've really based everything we've done around really making sure that physicians are really well educated. And now we're adding even more physicians for us to do over the next several months and period going forward as well. So we feel good about where we are, but it absolutely will take some time for us to continue to realize our long-term opportunities.

Our next question comes from the line of Salveen Richter from Goldman Sachs.

This is Kevin Patel on for Salveen Richter. What are your thoughts on the evolving NASH landscape for biomarkers? And how are you, if at all adapting them in your study?

Yes, thanks for the question. So biomarkers of various kinds are ultimately critical to validate in the NASH population. As you know, biopsy remains the gold standard, but all stakeholders are in agreement that we need to obsolete biopsy. That said, there is no currently accepted biomarker -- a noninvasive marker that can take the place of biopsy. We and other companies have incorporated a number of them into our trials. And I believe that with -- plus our Phase III data coming and other ongoing studies of various imaging and serum markers in particular, we will see one or more of these gain sufficient traction from both the regulatory and ultimately commercial standpoint to take the place of biopsy. At this point, I don't want to speculate on what those can be. We'll just have to wait for the data.

Our next question comes from the line of Michael Yee from Jefferies.

This is Kelechi on for Michael Yee. My first question is based on the trends to date, and how confident are you that scripts will regrow in Q2? And I'm asking you to try to triangulate between what your sales force is seeing in the field and also IMS script data? And my second question is, could you generally speak to some of the competitor data that you saw at EASL that gives you confidence in the mechanism, the action of OCA, especially in your ongoing REGENERATE and REVERSE studies?

Sure. I'll ask Richard to take the first part of the question.

Yes, sure. As far as the -- your question around the trends from IMS and what we're hearing, so I think importantly what we have seen is since the end of March, our rolling 4-week average for TRX transit now actually caught up to where we were prior to the Drug Safety Communication in September. So there was a gap there, but we feel like we're right back on [just from that] trend from -- prior to the Drug Safety Communication. What we are hearing and seeing from our sales force is very consistent with the research that we provided. We believe that the label has provided a lot more clarity and confidence for physicians. And as you heard when we get our Pulse Research, about 94% of physicians said they do intend to prescribe in the next 6 months. So this is a build, it's hard to predict exactly what will go on in Q2. But we're confident in our growth opportunity and the model that we've done to enhance our ability to reach more physicians who are managing PBC patients.

Yes. And with respect to your question about mechanism in NASH in particular, and the competitive landscape, as I mentioned in my prepared remarks with the benefit of time, we actually feel more and more confident in OCA as an FXR agonist in NASH. It remains the only investigational therapy in this indication to have shown a robust efficacy across all the key histopathologic features that underlie the 2 currently approvable endpoints, namely NASH resolution and fibrosis improvement. And that, of course, is based on the FLINT trial, well-controlled trial. There've been a number of early Phase II data sets reported out over the last year plus, some of which have been relatively disappointing or hard to interpret and there have been some intriguing data sets. At the end of the day and we've been saying this for long time, this is a huge heterogeneous disease population and with a tremendous unmet need and it's gratifying to see the amount of innovation going on. There is going to be room for different drugs that eventually find their way in different subgroups of the NASH population, and it's important ultimately for patients to have options. But we feel based, again, on the FLINT data and the mechanism of our drug, very well positioned going to REGENERATE data next year to -- assuming success to file for approval and be first-in-class and establish OCA as backbone therapy in this disease population.

Our next question comes from the line of Brian Skorney from Robert W. Baird.

This is [Trevor Brown] on for Brian. Can you please review the protocol for monitoring LDL on the REGENERATE study? And what options investigators have to intervene? And does the NGM data that showed patients who were managed through that 10% below baseline by the end of the study despite an almost 50% increase after initiation of therapy, change your thoughts, that's what we might see in REGENERATE as far as LDL changes by the 72-week endpoint?

Yes. So REGENERATE is designed as a real-world study. So what that means is that patients are allowed to be on a statin or not on a statin at baseline. Investigators are encouraged to monitor lipids as they would in the real world and manage LDL cholesterol. They can do so by adding a statin, by increasing dose of a statin. So that's the answer to the design question. The second part of your question was about NGM, which just reported out Phase II data at EASL showing a 50%-or-so LDL excursion. And I think what you're alluding to is that FGF19 is in the FXR pathway. What we've seen is an LDL signal that is significantly less, lower with OCA than the FGF19 homologue. It's unclear why that is; it's a different compound. But I wouldn't expect -- we've now reported out in several data sets on the LDL signal, including the controlled trial, the Phase II trial we ran last year where we demonstrated that a low dose of atorvastatin can reverse the LDL signal with our drug in the large majority of patients to below baseline. So I don't think there should be any readthrough from the NGM data to what you would expect to see at REGENERATE.

Our next question comes from the line of Joe Beatty from Citi.

Can you just discuss the next steps for PSC and where that's at and finding a path forward and clinical trial design?

Yes, thanks for the question. As I mentioned in my remarks, we remain absolutely committed to PSC patients. This is really a devastating autoimmune cholestatic liver disease, where unlike PBC there is no approved [on] therapies. And despite the fact it's about 1/3 as prevalent only compared to PBC given that any new treatment would be first line, it roughly for represents an equivalent opportunity to PBC. So a huge unmet need there. And that said, there is no regulatory pathway yet defined by FDA. FDA just recently was co-author on a paper based on an endpoints workshop that they hosted in 2016, where they discussed a number of different potential endpoints, starting with alkaline phosphatase, the same endpoint, the same serum liver enzyme that was the basis for OCA's approval in PBC. And we know that alk phos, of course, is clinically meaningful in PSC, but as we've been saying it for some time while we expect it to be included in a Phase III endpoint, we also expect to add at least one other endpoint in the composite. And that's what's going to take a little bit of time to define with the agency. I don't want to speculate -- these things take time. If you remember, we were the pioneer in 2 other indications in PBC and NASH. It took some time and several interactions to get there to definitive pathway. We expect the same in PSC and that's why at the moment we're just guiding to providing an update on our plans in this indication later this year.

Our next question comes from the line of Jim Birchenough from Wells Fargo.

It's Nick on for Jim this morning. Mark, you mentioned the target of a real-world database. My recollection is that there are mix of patients that were included in that were quite different from POISE. I think there were a substantial number of patients with autoimmune overlap hepatitis, compensated cirrhosis. So I'm wondering if this reflected a patient population receiving OCA a year ago? Is that similar to the patients that are coming on to OCA today? And then I have a follow-up.

Yes. Nick, so you're referring to the target PBC abstract presented at EASL showing a recapitulation of our Phase III data essentially on the benefit. I -- most of these patients -- all of these patients had a diagnosis of PBC as far as I recall. With respect to compensated cirrhosis, remember that there is a healthy mix of patients with presumed cirrhosis in the Phase III trial. And I say presume because they weren't necessarily biopsy confirmed. Some of them were, but most of them non-invasively diagnosed with cirrhosis. So our belief is that the target PBC data are representative of the population that we see going on to Ocaliva, and who were studied in our the Phase III program.

And that you think that reflects today's population coming on? It wasn't that there was a warehouse group of very sick patients that is as reflective today?

Well, we did -- look, there was a channel effect here when we launched. And Richard has said this before, that in the early days of this launch, there were disproportionate number of patients with advanced cirrhosis, so exactly the patients where dose modification is required, disproportionate to their representation in the overpopulation of about 2% to 3%, we believe. That has settled in. And I think -- I'm looking at Richard right now, I think we're sort of down and around 4% of scripts in the advanced cirrhotic population, but the vast majority in the earlier stage general PBC population.

And I think around 15% or so of these patients were taking Ocaliva or less than once daily. Again, is that reflective of what you would expect today?

I'll ask Richard to address that.

Yes. It's a little bit hard [indiscernible]. We saw post the Drug Safety Communication that there were a lot of variances as far as compliance to the scheduled drug regimen that people were on. So 15 -- there is definitely a little less utilization than obviously being 100%. 15%, I can't say exactly that's what we're seeing, but we definitely have seen slightly less than what would be expected for a daily consumption from a patient.

Okay. I think -- yes, okay, I'll come back to that. And then, Mark, just the last one, there was a competitor at EASL suggested that it was an FXR binding site in the promoter region of the alk phos gene. And that was the region they couldn't use alk phos as a biomarker in their trial. Given your deep expertise in FXR biology, did this present as a problem with Ocaliva development? And is this -- well, I'll leave it at that?

Yes. Well, look I don't want to get too deep into the science here. But what you're alluding to is Novartis' presentation of interim Phase II data with their FXR, non-bile acid FXR agonist in PBC, where they actually shied away from using alk phos. I think there is evidence for what they're saying. And we've seen, we reported this before, in non-cholestatic liver patients, we do see an increase in alk phos, that's pretty uniform. It typically stays in the normal range. And it is suggestive that there is an on-target increased synthesis of alk phos which actually to your question makes the results that we've demonstrated and reported on in PBC, all the more and PSC frankly, all the more impressive. Because we're -- the mechanism -- we're going against that headwind of an on-target increase -- slight increase to show a very significant decrease in alk phos. So I don't think it's going to change the -- from a regulatory standpoint, the dynamic with respect to alk phos. I think it would be very difficult to go to GGT, which is -- which was the primary readout in the abstract presented at EASL. There's not enough evidence for GGT, but it is intriguing that, that was reported.

Our next question comes from the line of [Irina Myrchin] from Cowan.

A quick one for Lisa. If I understood correctly, the survey you mentioned was performed before the EU label harmonization. So I was just wondering if you could discuss a bit the impact you expect, just update, to have on physicians and the launch in those geographies? And then more generally, based on the feedback you've been getting, could you perhaps briefly touch on how the patient perception has been evolving during the past few months?

Lisa, you'll handle...

Okay. Yes, yes, sure. So yes, the research which we said was conducted towards the end of last year, but it did actually go into January this year. And I think the key is that, we've been communicating the importance of appropriate dosing now since really before last year, right, since the U.S. FDA communication. So the label in many ways just acted to clarify and confirm everything that we had been kind of talking about from an educational reinforcement perspective. So I think that -- what we are certainly hearing is that physicians have found the kind of a finalization of the label and its subsequent kind of update both very reassuring, and just providing clarity of everything that they've been hearing over the previous months. So I think it's probably reflective and the high intent to prescribe and the confidence of non-prescribers to start prescribing. I wouldn't imagine it would look significantly different. I mean, I think that reassurance has been there. So bear in mind that this will happen relatively early on in the life cycle for some of these countries. And of course, largely Italy and Spain launched largely after all of the clarification happens on the EU label. So I think we're just moving forwards now with clear clarity and confidence around ensuring that people are appropriately informed of the label.

Our final question comes from the line of Ying Huang from Bank of America.

Just looking at the IMS script from fourth quarter to 1Q this year, it seems that in first quarter this year that TRX for Ocaliva was down about 2%, but your reported sales was a little bit more than that. Can you clarify maybe is there any inventory component here? Or even in gross-to-net, that's a little bit higher than in the fourth quarter? And then secondly, maybe looking at the REVERSE trial protocol published on ClinicalTrials.gov. The primary endpoint is 12 months. Can you just maybe provide a little bit color on why it's 12 months versus REGENERATE, which is 18 months?

Sure. Sandip, if you could take the first part of the question?

Sure. Sure, Ying. Yes. No, I think in the first quarter just generally what we had indicated is we do have higher growth in that, and that's just by industry wide sort of dynamics in terms of Medicare Part D, copay assistance and so forth that impacts gross-to-net in the first quarter. So we had guided towards the higher end of our range. And that's what we saw in the first quarter. So that was effectively the impact. Now with respect to inventory, I mean there is sometimes a slight build up towards the end of the year as -- but that's more because patients sometimes refill at higher rates towards the end of the year and that, but not anything that's dramatic. I think the key driver effectively is the gross-to-net.

Thanks, Sandip. Yes, and Ying, with respect to your question about the REVERSE protocol, look, REGENERATE, you're right, is a 72-week endpoint which was identical to FLINT. We of course -- we said this before that we designed REGENERATE to reproduce FLINT in every way possible as our flagship Phase III trial. Over time, based on our own data and other reported histologic data sets, we've gained more and more confidence that we should see real changes histologically, including in fibrosis at nearer-term time points. So that gave us the confidence to design REVERSE as a 1-year trial as opposed to well, really a 72-week study. So there is not that much difference. As I mentioned, our goal with REVERSE is to readout on a relatively timely basis to support broader market access, including patients with compensated cirrhosis.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mark Pruzanski, CEO, for any further remarks.

I just want to thank everyone of you listening in today. As I mentioned in my prepared remarks, we look forward to remaining laser focused on driving growth in our PBC franchise, advancing our leading Phase III NASH program, pursuing other progressive non-viral liver disease indications and remain committed on behalf of all employees to meeting the high unmet needs of our patients with these devastating diseases. Thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.