Intercept Pharmaceuticals Inc (ICPT) 2018 Q2 法說會逐字稿

Thank you for joining the Intercept Pharmaceuticals Second 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 approximately 2 weeks.

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 second quarter 2018 financial results, which is available on 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 for indications other than PBC, the timing and potential commercial success of OCA and any 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 statements 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 in 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 for any indication other than primary biliary cholangitis, or PBC. No conclusions can be drawn concerning the safety or efficacy of OCA for any other indications at this time.

Today's call will begin with 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. The first half of 2018 has been an exciting one. We've made good progress on our priority initiatives and I'm happy with what our team has accomplished. Today, we reported $43.2 million in second quarter 2018 worldwide Ocaliva net sales and our launches continue to progress across all of our approved markets. These efforts have been recently bolstered by strategic expansion of our sales infrastructure. And I'm happy to report that with this completed, we've set the stage for further growth in the PBC business. We continue to believe that PBC represents a robust opportunity across multiple geographic territories, and we fully intend to realize that opportunity.

We are today reiterating our previously announced guidance of between $170 million and $185 million in 2018 worldwide Ocaliva net sales. Richard and Lisa will provide further details later in the call.

In addition to our work to bring Ocaliva to patients with PBC, we continue to advance our industry-leading Phase III NASH program, which we believe is based on the most robust clinical dataset of any competing program. To date, OCA remains the only investigational therapy to have shown efficacy across all the key liver histologic features that inform the 2 currently approvable endpoints: First and foremost, fibrosis improvement, which has been shown to predict clinical outcomes. And second, NASH resolution. We believe the therapy that can provide both of these attributes will be highly desirable to physicians treating patients with NASH.

As you may recall, our comprehensive Phase III NASH program includes the REGENERATE trial in patients with advanced fibrosis and the REVERSE trial in patients with compensated cirrhosis. REGENERATE is our flagship NASH fibrosis trial and 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 continue to remain focused on generating robust data and are reiterating our guidance for readout of top line results 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 and NASH patients with compensated cirrhosis. REVERSE is currently enrolling, and we believe that positive data will be supportive of our broader commercial efforts in NASH.

Finally, we continue to work to expand our cholestasis franchise. And in the near term, this involves defining a path forward for OCA in primary sclerosing cholangitis, or PSC. We continue to work with thought leaders and laboratory authorities on this indication where there are no approved therapies.

As we look to the second half of 2018, we remain in execution mode with the goal of bringing important medicines to patients with the progressive liver disease. Our focus remains on driving exceptional execution in both our commercial efforts in PBC and our development efforts in NASH.

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

Thanks, Mark, and good morning, everyone. For the second quarter, we reported $34.5 million in net U.S. Ocaliva sales. We are pleased with our execution, which resulted in significant volume growth compared to the first quarter.

More importantly, in the second quarter, we saw substantial stability return to our business, and we achieved our highest level of total prescriptions in a quarter since launch. With this space, we feel like we have a solid foundation for our business going forward.

While on return to stability in Q2 has mostly been driven by our core group of physicians, who are early adopters at launch. We believe that one of our key longer-term growth initiatives will be driven by expanding our treater base. [Serious] postapproval, we knew that it was time to expand our efforts and essential to expanding our treater base is our sales force expansion, which included the expansion of our existing sales force and the implementation of a contract sales team.

We have completed these updates and now increased our customer coverage by about 50%. This includes reaching far more community-based GI physicians, which we believe is critical to reach more PBC patients. In addition to calling on our core physicians, our team has been out educating these newer physicians on the unmet need in PBC and had identified potential patients for Ocaliva as community-based physicians are generally less familiar with PBC.

We expect that our sales force expansion initiative will begin to increasingly contribute to growth in the second half of 2018. Because on average, PBC patients visit their physician every 6 to 12 months and it takes several sales calls and some time to change physician behavior.

Physician's interest in speaker programs has grown and there was a significant increase in attendees in Q2 compared to Q1. Across all efforts, we've already seen a nice increase in first-time prescribers in Q2 versus Q1. Also we are focused our overall messaging, as we know that our efficacy data is very compelling to both our users and very importantly, our nonusers. We have rolled out new promotional materials to support our Ocaliva brand messaging and are increasing our PBC patient communications as well.

The first half of the year has been a critical time for us to move beyond our past challenges and focus on enhancing our customer-facing efforts. We believe that our recent actions will allow us to effectively reach many more physicians, and ultimately, PBC patients who may be in need of a new treatment option.

We know that we are in the summer months, when fewer patients tend to initiate therapies. However, we do feel very good about the stage that we have set for sustained growth. Thank you for your attention, and now I'd like to turn the call over to Lisa.

Thanks, Richard, and good morning. We are very encouraged by the performance in the international region, which contributed USD 8.7 million in Ocaliva net sales in the second quarter. As expected, our international sales are mostly from Germany and France with an increasing contribution from the U.K. and Canada. The launches earlier this year in Southern Europe, Italy, Spain and Portugal are also performing strongly as we secure regional access. Whilst we don't have the level of prescriber data that we do in the U.S., we estimate that the number of prescribers has doubled in international since December of last year.

As we look forward, we see a number of important events that should help our international efforts meaningfully. We completed the national negotiation process to support public access in Canada, which will allow us to reach the other 60% of patients who previously could not access Ocaliva without private insurance. Reimbursement across provinces and territories is expected to occur through the second half of the year.

In addition, we will continue to take significant steps to broaden access to Ocaliva. This quarter, we received regulatory approvals in Switzerland and Australia, we expect sales in Australia by the end of 2019. We also achieved our first sales in Israel during this quarter. Importantly, we are able to leverage learnings from the early launches, as we entered these countries.

Within the broader community, we are particularly encouraged that for the first time the EASL governing board approved the patient version of the PBC clinical management guidelines for publication. These patient guidelines are an essential tool to help the physician and patient discussion and to reinforce the recognition of the unmet need in this disease.

So in summary, we are optimistic about our continued growth in new patient start this year for international, and our teams are doing a great job of accelerating access to Ocaliva, which is now funded in all major European countries and Canada.

And with that, I'll hand 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 June 30, 2018. I'd like to take the opportunity to give you an update on our Q2 2018 results, our cash position and our financial guidance for 2018.

We recognized $43.6 million in total revenues in the second quarter of 2018, including $43.2 million of Ocaliva net sales. Our Ocaliva net sales were comprised of U.S. net sales of $34.5 million, and ex-U. S. net sales of $8.7 million.

Gross-to-net deductions for the quarter were towards the lower end of our previously communicated 10% to 15% range. Our GAAP total operating expense for the quarter were $113.4 million, and our GAAP -- non-GAAP adjusted operating expenses, which excludes stock-based compensation and depreciation, were $98.1 million.

Our cost of sales for the quarter were $0.7 million. As previously discussed prior to the FDA approval of Ocaliva, we expensed cost related to the manufacturing and buildup of our 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 $7.6 million of interest expense for the quarter related to our outstanding convertible notes.

Moving on to our cash position. As of June 30, 2018, we have cash, cash equivalents and investable securities available for sale of approximately $538.3 million. This includes $261.4 million in net proceeds from our public offering and concurrent private placement of our common stock, which we completed in April 2018.

And finally, moving on to our 2018 financial guidance. All we expect to see is a typical summer seasonality in the third quarter. We are reiterating our previously announced 2018 full year Ocaliva net sales guidance in the range of $170 million to $185 million. We continue to expect gross to net for the year to be in the 10% to 15% range. In addition, we're confirming our previously announced 2018 non-GAAP adjusted operating expense range of 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 component of our outstanding convertible notes.

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

With that, I'd like to turn the call over to the operator. Operator?

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

Two questions for you guys. One is on the REGENERATE study. I feel like we're getting sort of the general later innings of getting towards the day in the first half of '19. The guidance seems quite broad on that. Maybe, Mark, as people get towards close to this data, can you just talk to the range of that guidance and what would drive data at the beginning of the first half versus later in the first half, and what the assumptions are in that and how we should think about that? And the second question was related to competitive FXR data whether coming at AASLD, or others that are going on, and how do you think investors should contextualize all this FXR data coming out as it relates to your data, which obviously is coming in the first half?

Sure, Mike. With respect to REGENERATE, as I mentioned in my prepared remarks, we're reiterating our guidance for the first half. Obviously, no one is more focused on getting to database lock and readout of this flagship trial harder than we are. But at this point, we're not prepared to tighten guidance. This is a massive trial. We've got a huge number of biopsies coming in from around the world. It does take time to scrub the data and get to the most robust data possible, right? And remember that our study is an 18-month study. So we've got a lot of patients coming through later this year. In any case, we're very much looking forward to getting to readout. It's coming into site right now. And, as I mentioned, again, we're confident based on the robust clinical data influent on both endpoints. With respect to the competing FXR programs out there, so far, we haven't seen anything that moves the needle for us. I've mentioned before that, what I call, the first generation of non-bio asset -- FXR agonist up to 5 of them have fallen away over the years from preclinical to early Phase II, due to idiosyncratic issues associated with each one of those molecules, which is not to say that one or more of the current crop in various stages of development aren't going to make it, but there's nothing that we've seen yet definitively in a patient population that leads us to believe that there's anything truly differentiated out there from OCA from the compounds in our pipeline.

Can I ask just one follow-up to actually clarify the first question? Part of the thinking around the guidance for REGENERATE is a view that either dropout and reconsent and all those sort of issues that were brought up earlier in the year may have impacted, ultimately, the interim timing and how many patients were needed to hit that timing? Do you feel like that update to safety has absolutely not changed or dropout assumptions or anything like that?

Well look, large studies like this see dropouts all of them do. But again, we remain confident in our guidance for the readout of the study. We've -- this is a very well-powered study on both endpoints. And as I mentioned in my prepared remarks, we are absolutely committed to generating the most robust data possible.

Our next question is from Jay Olson with Oppenheimer.

I was wondering if you had seen a real world study of NAFLD and the impact on health care resource utilization that was presented at DDW in June, which showed a cost burden of $32 billion in the U.S. and it was driven mostly by F3 and F4 patients. So I was wondering if you had seen that if the conclusion that reducing fibrosis in F3 and F4 patients is the primary driver of clinical and economic outcomes is consistent with your view of the NASH landscape.

Yes, thanks. Appreciate the question. We did see it. There's a growing body of research that keeps on reconfirming the epidemic proportion of the NAFLD -- really NASH epidemic. I think it's correct to focus on patients with advanced fibrosis and cirrhosis. They're the ones really driving the public health burden here and therefore, the appropriate -- at least initial focus for therapeutic intervention. At the end of the day, what you need really absolutely to focus on is preventing patients from progressing to cirrhosis, because that's where the biggest impact is on the health care system. And what's clear here and you alluded to this, is that fibrosis is the driver, right? Study after study has shown a clear association of fibrosis stage with not just liver-related outcomes, but all-cause mortality. And that's why we feel that being able to demonstrate a benefit on fibrosis is a very critical for a NASH drug, independent of what we today call NASH resolution. But in our market research, I mentioned this in my prepared remarks, what physicians who are seeing deluge of patients in their clinics really would love to see a product that can do both. That can both reverse and stabilize fibrosis as the key and also result the underlying features that are driving steatohepatitis. And again, I keep saying this because it happens to be true based on the FLINT study, we, again, believe that our compound OCA is the only one -- only investigational therapy out there that has demonstrated the ability to do both.

And maybe just a quick follow-up. One of the authors of that study indicated that according to his economic analysis, a drug approved to treat NASH that did show a significant reduction in fibrosis and prevention of progression to cirrhosis, as you pointed out, could be reimbursed at a net annual price of $5,000 with favorable economic outcomes. And I was wondering if that's consistent with your pricing analysis for OCA and NASH?

We're not going to comment right now on pricing NASH. It's really premature.

Our next question is from Salveen Richter with Goldman Sachs.

So two questions here. One on the REGENERATE study. Anything on surrogate biomarkers that you're going to release on the data set. And then just evolution of your thought process here between the -- or just in general the overall landscape thought process here and the link between NASH resolution and fibrosis improvement? And whether have you seen NASH resolution, we should expected that fibrosis improvement will come? Or whether that is not necessarily the case here? And I have a follow-up.

Thanks, Salveen. So with respect to noninvasives in REGENERATE, we are -- we have incorporated a number of them both imaging, biomarker and other microbiome, for example. And over time, certainly, we'll be reading out on them. I can't promise that the initial top line readout will have robust data there. But certainly, we -- and not just we, but I think everyone right now in Phase III has incorporated some subset of noninvasives in their studies, and we'll see a lot of robust data coming out of that correlating with histology and eventually outcomes. So -- and I'm happy to answer any specific follow-up on any one of these noninvasives.

With respect to NASH resolution, I think the question that you asked speaks to the hypothesis. And it is really right now just a hypothesis that if you achieve histologically what we currently define as NASH resolution, which specifically means the disappearance of ballooning hepatocytes and going to residual or no evidence of inflammation on biopsy, irrespective of what that is doing, does that ought to predict or lead eventually to improvement in fibrosis, but nobody has been able to show that yet. From what we can tell right now, there's not necessarily a correlation in recent data sets, including, frankly, the FLINT dataset don't show any correlation between first what MRI-PDFF, which measures fat content, as you know, in the liver, shows what then in turn NASH resolution predicts, right? At least in the context of FLINT study, the only correlation between noninvasive assessment of fat and the NASH resolution was steatosis, was fat, which is the one feature here, which has not accessed as part of the NASH resolution endpoint. So I think it's premature right now to definitively answer your question and the jury is really out, and I come back again to the fact that this is -- fibrosis on the other hand very definitively has been linked to outcomes. And there's been much more advancements in terms of already marketed and investigational noninvasive markers of fibrosis than NASH resolution.

Great. And just a follow-up on Ocaliva and PBC. It recognized that the trajectory is stabilized and you're expecting an uptick in the second half, but what have the gating factors really been apart from the label to getting more of an uptick here?

Yes, it's Richard. Yes, and thanks for the question. So I think when we think about PBC, I sort of always remind myself that it's a rare disease that has had no new options for almost 20 years. And it is -- I would say, because it's a rare disease very promotionally sensitive. Our focus really know is really expanding our reach and covering a lot more community-based gastroenterologists because we know that patients are spread throughout. And that's why our sales force expansion was quite a very important initiative for us in the first half of this year. We also note that it generally takes several calls to really start to change behavior. But what I can say is we saw more calls made in the last quarter than we have in any previous quarters since launch. And I really do believe that by having our increased coverage and reaching more of these physicians, it is a continued platform for growth for us in the second half of the year and going forward as well.

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

This is Beau Miller on for Brian. Can you guys maybe speak to what the latest updates on the DSMB have revealed? I think you spoke earlier in the call on the rate of dropouts, but also on liver safety. Can you just give us the latest there? And then also on the price increase in July, can we expect a similar rate of gross to net going forward in light of that price increase? And also ex-U. S., can you talk a little bit about competition in terms of what you're seeing there and how that impacts your long-term growth assumptions going forward?

Sure. I'll take the first part of the question on DSMB. As I've mentioned in the past, our DSMB meets regularly on a quarterly basis at least and reviews all of our ongoing studies. There's nothing to report that's untoward from the latest review. And I can tell you that we now have -- we don't put out a running tally of enrollment, but I can tell you that REGENERATE alone is now bigger than any competing NASH program out there in terms of number of patients enrolled. So we're feeling good based on where we are there. With respect to gross to net, I'll hand over to Sandip for that.

Yes, no, I mean, we continue to guide towards the 10% to 15% range and any impact in terms of gross to net from price was incorporated in our guidance.

And then the third part of your question was international competition. Maybe Lisa, you could make a comment?

Yes. So of course I mean, apart from UDCA, there are no other licensed options for patients with PBC. So obviously our focus is on continuing to promote Ocaliva to the labels set for those patients who are either unable to tolerate UDCA or who don't get an optimal response. That is a small amount of piece of investigational off-label product, but that study contains a very small number of patients.

Our next question is from Brian Skorney with Baird.

This is Trevor on for Brian. Just wondering if you have any blinded data at this time on statin implementation and discontinuations in the REGENERATE study?

The short answer is we don't. The study is blinded. As you know, we -- this is as close to a real-world study as we can design it, which means that patients who were randomized for the study, originally, could be on statin or not. We are stratifying and to look at patients who are on or off. Patients can be put on a statin over the course of the study, and there is a recommendation and protocol to follow local guidelines in management of cholesterol consistent with AASLD and EASL guidelines for statin use in the population. But we will have that data at the end. And I'll just remind you that last year, we read out on the Phase II control study where we specifically looked at the combination of OCA and atorvastatin different doses and reproduced prospectively what we had shown retroactively post-talk in FLINT and that is if you add a low dose of Atorva, 10 mg of Atorva to OCA is not only safe, well tolerated, but does the trick of managing LDL not really different from what we saw in placebo patients. So we're very happy to advocate as does (inaudible) be EASL, the use of statins in the population.

Our next question is from Ritu Baral with Cowen and Company.

This is Irina on for Ritu. My first one relates to the cirrhotic NASH program. Just wondering how enrollment is going there? And whether dropouts so far are in line with your expectation? And then I have one more.

Yes, so you're referring to the REVERSE on Phase III trial, who's enrolling. We're expanding sites around the world for our study plan. It's a little too early right now to provide any more specific guidance with respect to when we expect it to fully enroll and readout, but we're definitely making progress. We don't comment on dropouts, but we haven't seen anything untoward in the study.

Great. And then just wondering has there been any change in inventory policies that you had going back to the Ocaliva launch in PBC?

Would -- can you clarify a little bit more on that? You're talking about internal inventory, spread inventory?

Yes, internal inventory at your hub.

No, no. I mean, our inventory at the hub remains stable to support the continued growth of the product. So no changes there.

Our next question is from Steven Seedhouse with Raymond James.

Just on REGENERATE trial, you stressed the importance of fibrosis from a clinical benefit standpoint. I'm just curious which of the 2 endpoints though fibrosis improvement or NASH resolution do you think is less variable or perhaps differently more predictable. And I'm just trying to get a sense directionally of how you might have allocated alpha between those 2 endpoints and if it's allocated evenly or not?

Well, we're not going to get into the details of our statistical analysis plan on this call. What I can tell you is that the benefit -- the advantage we have is that we're the only Phase III program that is reading out on both of these endpoints, as you know. And we've agreed with FDA that the study can succeed if we hit one or the other. Of course, we're very much -- I'm hoping that we can hit on both based on FLINT and the powering in the study. I can -- the only way I can answer your question about variability is simply to refer to the pretty consistent readout from a number of large long-term studies. We've just shown pattern of response that is -- appears to be from an absolute response standpoint more robust on fibrosis, both in terms of placebo, what you see with placebo, and highlighting, frankly, the critical importance of having a placebo in any study looking at both of these endpoints. Then you see in NASH resolution, perhaps that's not surprising because NASH resolution means what it means, which is disappearance -- essentially disappearance of the underlying features. Whereas fibrosis improvement by one stage can allow -- can still allow fibrosis. But I can't speak any more specifically than that to variability.

Okay. And just quick on PBC, you mentioned that core group of physicians driving the return to growth and also increase quarter-over-quarter in first-time prescribers. Can you just quantify the first-time prescribers now versus prior to the Dear Doctor letter maybe and on a year-over-year basis? And are you back to where you were at this time last year or not quite yet? And also are you seeing continued increase in first-time prescribers so far this quarter?

Sure, thanks. Yes, we really be able to give the exact numbers. We have a lot of first-time prescribers (inaudible) that that we are early in the phase of launch, but what I can say is, in the first quarter of the year, they were actually more repeat prescribers than first-time prescribers and the trend has now changed in the second quarter of this year. So that's clearly a continued area of focus for us to get more of these folks on board in the second half of the year.

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

It's Aspen on for Ying. Just a couple of quick ones. The sequential growth in the PBC sales, was that primarily driven by volume? Or was there any sort of pricing benefit? And then have you seen any feedback on the Dear Health Care Provider letter in Europe? And lastly, for the PSC endpoints, do you have any timeline that you give us for the any -- maybe a meeting schedule with the FDA for working out what additional endpoints you will need beyond all above?

All right. So maybe just in terms of your question on volume versus price. In the first half of the year, and even the last quarter, we didn't have any pricing changes. So it was all driven by volume.

And Lisa, if you could take the HCP in Europe question?

Yes, thank you. So as you probably remember, we've been communicating around the importance of correct dosing and asking payer patients for some time before the Dear Health Care Provider letter was issued. So it really acted as a reinforcement for the communication we've already been seeing. And I guess what I'd do is refer you back to the strong quarter-on-quarter growth that we've seen this year, and in fact the number of prescribers that we've seen since December last year has doubled So we're optimistic about the growth going forward.

Great. And then with respect to PSC, we continue to guide that -- by the end of the year, we'll be able to update you. We don't comment on our meeting schedule with any regulatory agency. But I have said before that just given how overwhelmed FDA specifically this review division, dealing with NASH, PBC, PSC, everything that's going on, they're bandwidth constrained and that's led to certain delays. But we're confident that we'll be able to provide an update by the end of the year.

Our next question is from Joel Beatty with Citi.

Regarding the REGENERATE interim analysis reading out in the first half of next year, can you discuss which endpoints are most important for payers and any conversations with -- arguing for the benefit of using OCA in NASH?

Yes. Look, as I've mentioned on this call, we continue very much to believe that fibrosis is certainly more important. There's very clear evidence linking fibrosis to progression to liver failure need for transplant and death, all-cause mortality not just liver-related outcomes. And that's why we continue to stress the importance of showing benefit on fibrosis.

Yes, and Mark, I would -- it's Richard, I would just add now, as Mark has said, fibrosis in addition to NASH is important to the clinicians. I think the compound that can actually achieve both endpoints are going to be meaningful to our broader customer base.

Okay. And will there be any way from the interim data to link, at least preliminarily, fibrosis and NASH resolution to outcomes, or any type of analysis like that completely held until the final analysis?

I would -- I mean, as you know, REGENERATE and all of the current ongoing Phase III NASH programs are designed as outcomes on trials. But typically over a period of 5-or-so years, just given the time needed to accumulate sufficient number of outcomes in this population. So I would not expect -- obviously, we're going to monitor outcomes in the study. We'll have sense of them in the interim, but I wouldn't expect that.

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

This is Joey on for Alan. Two quick ones here. The first one, can you give an update on the -- looks like it's still ongoing the OCA biliary atresia trial? And as a follow-up to that, are you thinking about potentially other sort of rare liver disease indications for that? And second question is what's the -- just on high-level Intercept's thinking about combination therapies, for example, using OCA as a backbone therapy?

Yes, thanks for the question. So we never had a chance to talk about biliary atresia, but this is a very rare pediatric poststatic liver disorder. It is our pip right now, and we continue to enroll the study. As you can imagine, given how few patients there are who are appropriate to include in the clinical study especially, it takes quite some time. So we're not commenting on rate of enrollment, but we remain committed to the study and continue our enrollment efforts around the world. We are very much -- despite the fact that there's so much focus on NASH, which is perhaps one if not the only remaining true blockbuster untreated diseases out there, we remain committed to the broader community of patients with progressive nonviral liver diseases, who have -- who often have no options other than the hope and prayer of eventually getting a liver transplant. And that means that we are actively looking at other rarer liver diseases to pursue. And then second part of your question was on combo with OCA establishes as a backbone. Yes, absolutely. And not just in NASH, but also in the context of polycystic liver disease, PBC, PSC. We very much continue to evaluate opportunities to combine with OCA. We do believe that said that it's early days here and that we need to see more data typically with a lot of proposed mechanisms out there to feel confident, even in just -- in proof of concept and safety. And it's going to take a lot longer than people think to see real combo regimens end up on the market whether it's for NASH or other indications.

Our next question is from Joseph Schwartz with Leerink Partners.

This is Dae Gon dialing in for Joe. So two quick ones for me. I guess, looking forward into your 1 half interim analysis REGENERATE data, I was wondering given that it's a co-primary endpoint, you kind of alluded to this question earlier, but just wanted to dig a little deeper in terms of your research, if only NASH resolution hits statistical significance versus only fibrosis hitting the improvement -- I mean, fibrosis improvement hitting statistical significance, what impact would you think that had on the uptick trends both on the physician and patient side? I just kind of briefly talked about the payer side of the equation on that one. And then the second question is as we look into the NASH market evolution, we're hearing more about the NASH market going into more of polypharmacy approach. So you kind of alluded to this in the prior question, but what internal work have you done to at least start addressing what potential combinatory would be amenable or at least doable. And I guess, based on the proposed mechanisms that's been out there thus far, at least on a biological hypothetical level, what do you think makes more sense on the safety and efficacy side?

I'll ask Richard to answer the first part of your question and then take the second.

Well, I guess, as far as -- I mean, we're not really going to comment about when the primary hits or the other, but what I can say is we have done an extensive research in the NASH marketplace. To really characterize both the patients that are in offices, the physicians who are treating them and the poly, sort of, conditions that a lot of patients are facing. We know that a lot of these patients are -- have comorbid conditions like diabetes and cardiovascular disease. We haven't really well characterized that. So I think it's a little bit too early to say exactly how this will play out, but what I can say our knowledge about sort of what -- a lot of these patients are going through. I think we've really built up quite a knowledge base in here. Mark, I don't know, do you want to take the rest of the question there?

Yes, sure. So I think you're asking about combo and maybe a little bit more detail. As I mentioned in answer to the previous question, it's still early days. There has been obviously some promising data. I've said publicly in the past that we think just given that the targets already validated with the class of molecule out there in the most at-risk population with one, look we've got an -- our eye on that, that looks interesting. But at this point -- they're obviously other mechanisms as well, but most -- again, most are just at hypothesis stage at this point without definitive proof of -- even proof of concept in Phase II. And I mentioned previously on a call that the critical importance of having -- doing well-controlled studies and reading out on the histologic biopsy-based endpoints that are actually approvable, because nothing else, noninvasive or other so far has been shown to be predictive.

If I can just squeeze in one more. I guess, how has the NASH market been evolving? I mean, with all these new drugs coming into the clinical trial pipeline, are you seeing the NASH market segmenting in a particular way? And can you comment on that if you've seen any trends there?

Well, my simple answer is that there is no NASH market right now, because there's no approved marketed product out there for these patients. The only thing that we can do and it is first and foremost the most critical is diet and lifestyle counseling, right? And -- but, I was just out visiting one of the top hepatology centers in the country the other day, they are deluged with these patients in their clinics. All they can do is provide nutritionist support and counseling for these patients to try to lose weight and improve their -- and get off the couch. At the same time, what we're also hearing is that while obesity is a -- there is also lean NASH that is coming more into the fore right? Where patients aren't, obviously, obese. And so this is an epidemic proportions, a lot of physicians out there perhaps in gastros, you see these patients are eagerly awaiting approved therapies. But until then, we can't really talk about the market and how it's going to segment.

Our next question is from James Birchenough with Wells Fargo Securities.

This is Yanan in for Jim. Two quick ones for me. So you mentioned you have increased the outreach to community GI physicians in your PBC launch efforts and they expect contribution from this segment to emerge in second half of '18. Just curious what proportion of PBC patients are treated by community GI physicians? And second question is regarding -- related to the power -- the NASH program. A number of placebo-controlled trials have let out since FLINT. So I'm just wondering is there anything to be learned when you look at their placebo arms and look at the fibrosis improvement and NASH resolution, are the rates consistent with FLINT and consistent with the assumption that went into your paralleling assumption for REGENERATE study?

Yes, thanks. I'll ask Richard to take the first part of the question and I'll take the second.

Yes, thanks. Great question. So as far as where the patients are, keep in mind in the United States, there's probably only about 700 physicians that are dubbed hepatologists and there's around 13,000 to 15,000 gastrologies. So obviously a vast majority of PBC patients reside in the gastroenterology community. And as we said before, PBC is a phenomena where the patients are spread quite thin. So I -- hard to give an exact percentage of around how many are based exactly in community, but we would say there is quite a large percentage. And generally what happens is the community GI just don't have many of the patients. They'll have only few at a time. So that's why our reach is important because there's a lot of physicians out there that probably manage only a couple or 2 or 3 of these patients. But there's large numbers of those physicians that do have these 2 or 3 patients as well. Mark, maybe back to you for the NASH question.

Yes, so you're asking specifically about what we've observed with respect to placebo response and learned from that. And I alluded to this earlier in the call, there has been a remarkably consistent pattern in the large longer-term studies, anything from 9 months on with respect to placebo response on fibrosis improvement by one stage. And that's basically around 20%. 1 in 5 patients on placebo improves. This has been consistent and again, highlights the critical importance of doing placebo-controlled studies in -- at the Phase II stage on biopsy -- with biopsy. I'm not going to get into conjecture right now about what drives placebo response, I've got my own hypothesis, but it has been consistently observed. NASH resolution, significantly lower response rates perhaps not surprisingly, as I mentioned, because here you're looking for disappearance of key features of the disease and you typically see single-digit responses. But again, fairly consistent across studies. But with respect to what we've taken away and our thinking about powering in REGENERATE, which, I think, was your question, we haven't seen anything that counters our assumptions.

I'm showing no further questions. I would now like to turn the call back to Mark Pruzanski for any further remarks.

Well. Thanks, everyone, for listening in today for the back half of 2018. We're very excited. Everyone here at Intercept is very focused on delivering on our key objectives, which continue to be to drive worldwide our PBC business and ensure that Ocaliva gets to PBC patients in need and of course to continuing the execution in our global Phase III NASH program and the lead up to readout and REGENERATE in the first half of next year. We remain steadfastly committed to the health and well-being of patients with progressive nonviral liver disease, whatever their disease.

Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Everyone, have a great day.