Intercept Pharmaceuticals Inc (ICPT) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2021 Intercept Pharmaceuticals Earnings Call. (Operator Instructions)

I would now like to turn the call over to your host, Lisa De Fracesco, SVP, Investor Relations and Corporate Affairs. You may begin.

Thank you. Good morning, and thank you for joining us on today's call. This morning, we issued a press release announcing our third quarter 2021 results and financial position, which is available on our website at www.interceptpharma.com.

Before we begin our discussion, I'd like to note that during our call, we will be making forward-looking statements, including statements regarding our approved product and clinical development program; certain regulatory matters; and our strategy prospects, financial guidance and future commercial and financial performance. 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 such statements, except as required by law.

These forward-looking statements are based on estimates and assumptions 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 risk 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 public filings with the SEC.

Today's call will begin with prerecorded prepared remarks from our President and CEO, Jerry Durso; our Chief Commercial Officer, Linda Richardson; President of Research and Development and Chief Medical Officer, Dr. Michelle Berrey; and Chief Financial Officer, Andrew Saik. Additionally, available today for Q&A purposes are Dr. Gail Cawkwell, Senior Vice President, Medical Affairs, Safety and Pharmacovigilance; and Dr. Paul Nitschmann, Senior Vice President, Regulatory Affairs. (Operator Instructions)

Let me now turn the call over to our CEO, Jerry Durso. Jerry?

Thanks, Lisa, and good morning, everyone. Thank you for joining us on our third quarter 2021 earnings conference call. As we near the close of 2021 and my first year as CEO of Intercept, I would like to start by reflecting on the great progress that we've made against the main objectives that we set out to achieve at the start of this year: first, to continue growing our foundational PBC business with Ocaliva; second, to execute on our clinical and regulatory goals, including progressing our clinical development program in advanced fibrosis due to NASH; third, to expand our portfolio and advance our internal pipeline; and finally, to improve our operational and our financial foundation to support our path forward.

Regarding our first objective, driving growth in our PBC business, we continue to see the strength and resilience of Ocaliva. As a reminder, the third quarter was the first full quarter since updates to the U.S. label were finalized at the end of May. We reported third quarter sales growth of 17% over third quarter last year, and as a result, have increased our sales guidance for the year. In a few minutes, Linda and Andrew will share additional details about our commercial performance and our outlook for the remainder of the year.

Now that we've worked through our label update in the U.S., I have strong conviction in our ability to continue to expand and grow this business long term. We've also made great progress executing on our clinical and regulatory goals.

In our NASH program, we remain on target to generate the largest data package in the field to support a potential resubmission of our NDA for OCA for the treatment of advanced fibrosis due to NASH. These important data will determine our path forward in NASH. We anticipate the data generation process could continue into the early part of next year. And if we believe the data support accelerated approval, our goal would be to have a pre-submission meeting with FDA during the first half of 2022. We also anticipate top line data from our Phase III REVERSE trial, which is assessing OCA in patients with compensated cirrhosis due to NASH near the end of this year.

We've also been working to expand our portfolio by advancing our pipeline and looking for opportunities to leverage our strengths. As we announced last quarter, we've initiated the first-in-human study for our next-generation FXR agonist, INT-787, and continue to advance our Phase II work for the OCA bezafibrate combination program in PBC. Michelle will share more details on our progress across these programs.

Importantly, in addition to making great progress on this year's objectives, we've also significantly strengthened our operational and financial foundation. We remain prudent with our expenses and reduced our cost structure, resulting in a narrowed operating expense guidance that we announced this morning. We also successfully exchanged the majority of our near-term debt to address the maturity of 2023 convertible notes. Furthermore, we significantly reduced our burn rate, and we're in a strong cash position with another cash-positive quarter.

These are critical steps as we enter the next phase of Intercept's journey, where, as we previously said, we will be making data-driven decisions in defining the strategic path for the company's future. This path could be supportive of either the pursuit of accelerated approval in NASH, or if the data do not support it, a focus on a profitable and growing rare disease business. Our solid foundation will allow us to focus on becoming a strong, successful company over the long term.

With that, I'm going to turn it over to Linda, who will talk about our commercial performance this quarter. Michelle will then provide an update on our regulatory and R&D activities, and Andrew will conclude with a review of our financial performance. Linda?

Thanks, Jerry, and thank you to everyone who's making time to join us today. As you saw in our press release this morning, our foundational PBC business once again demonstrated solid performance in both the U.S. and international markets in the third quarter and year-to-date periods. During our last earnings call, we indicated that we expected to see the impact of our label change in the U.S. business in the third quarter, and I'll be providing some commentary on this now.

First, the U.S. commercial and medical affairs teams did a great job as they work to educate health care professionals on the new label. We effectively reached our prescribing targets within the first 3 months following our receipt of the revised label, and now our sales team has fully pivoted back to promoting Ocaliva for eligible patients.

Second, our data show that many of the patients who are discontinuing Ocaliva are on a treatment regimen of once or twice weekly dosing, which has a lower volume impact. These are the patients who should discontinue given our revised labeling.

Third, we have not seen a significant impact beyond the label population, which you can sometimes encounter with implementing a label update. We've undertaken market research to assess health care provider reactions to our revised label, and the feedback has been consistent. Physicians report that they are aware of the new label and understand who the appropriate patients are for treatment with Ocaliva.

Furthermore, through discussions with our sales team, community gastroenterologists, in particular, noted that they were not typically treating patients who had decompensated cirrhosis before the label change. Therefore, there is less impact on their patient selection post label change. At the time the label was updated earlier this year, we had estimated that 10% to 15% of our Ocaliva population could be impacted. We anticipate that this ultimately will be at the lower end of that projected range. Furthermore, based on current trends, we believe that the impact of the label update on existing Ocaliva patients will be largely realized by the end of this year.

Moving forward, we are now focused on new patient starts, which we have seen weakened since the beginning of COVID and through the label change. We continue to see significant opportunity in our core PBC business given the vast majority of patients requiring second-line therapy remain eligible for treatment with Ocaliva.

The ability to share compelling new data with our PBC prescriber community is fundamental to our beyond ALP messaging. In September, we began sharing educational materials that highlight new data from our cohort of Ocaliva patients who remained in the open-label extension phase of the POISE trial. These data show a stabilization of fibrosis over 5 years. In a progressive disease like PBC, stabilization is resonating with our health care providers and feedback has been very positive.

Just a quick word on our compelling international business performance as we had another solid quarter with sales up 25% over last year. We continue to experience increasing growth in new patient starts and adoption of Ocaliva as compared to last year. Multichannel execution has been a strong focus for us, and we see excellent engagement with our customers across regions. We do anticipate a label change in our international markets in late 2021, with implementation to follow in 2022. The overall strong performance of the commercial teams through the third quarter has led us to increase our sales guidance for the year, which Andrew will discuss in his section of this call.

At this time, I'll turn the call over to Dr. Michelle Berrey. Michelle?

Thank you, Linda, and good morning, everyone. I'd like to provide a few key updates today. First, I'll provide you with an update on our NASH data generation and regulatory interactions, which remain on track. Second, I'll share some important progress regarding our post-marketing requirements in PBC. And lastly, I'll preview some exciting data we will be sharing at the upcoming Liver Meeting and update you on where we are with some of our other pipeline activities.

I'll begin with NASH. I'm pleased to say we're currently on track with the important data generation we outlined last quarter. Our safety database for OCA and NASH will now include more than double the patient exposure of our initial interim analysis with more than 6,000 patient years. On the efficacy front, we are currently reading all baseline and month 18 liver biopsies using our new consensus panel reading methodology that we outlined last quarter. We are in the midst of generating the largest data package ever created in the NASH field to support a potential resubmission of our NDA in NASH fibrosis, and we expect this process to continue into the early part of 2022.

As a reminder, we are generating these data from the REGENERATE study in pursuit of an accelerated approval for OCA in the U.S. as the first compound to treat advanced fibrosis due to NASH. We have also begun reading liver biopsies for our second large Phase III NASH study, REVERSE, studying OCA in patients with compensated cirrhosis. We expect that process to be complete and top line data from REVERSE to be available around the end of this year. As long as the data support it, we expect we will be able to hold a pre-submission meeting with FDA in the first half of 2022.

While our top priority remains generating important data to support a potential resubmission in the U.S., our MAA in Europe for NASH fibrosis also remains on file. We had requested and were subsequently granted a clock stop for our EMA application. We requested this in order to take advantage of the data generation we were conducting for our NDA. We are now planning to respond to our day 180 questions this month. While we've made progress and attempted to align these processes, our day 180 responses will not include all the data we're generating in the U.S. given that this data generation will continue into 2022.

And as a reminder, EMA has outlined a high bar for efficacy. Per the initial and overall NASH development guidance in their draft reflection paper from 2018, EMA expressed a preference for seeing statistically significant and clinically relevant efficacy in both reversal of fibrosis and NASH resolution or a 2-stage fibrosis improvement. But they also clearly stated that they will be looking at the totality of the clinical dossier submitted and that their final position would be data-driven following review of regulatory filings.

The unmet need for antifibrotic therapy in NASH has never been clearer. The NIH's NASH Clinical Research Network, or CRN, recently published results from a prospective study in The New England Journal of Medicine that again reinforces the strong association between advanced fibrosis and an increased risk of liver-related complications and death in patients with NASH.

And now I'd like to provide an update on our PBC post-marketing commitments. Discussions regarding our 2 post-marketing clinical outcome studies remain ongoing with both the FDA and EMA, and we've made some important progress. As a reminder, since the time of the Ocaliva approval for PBC in 2016, we have acknowledged the potential difficulties in recruiting and retaining patients in these blinded placebo-controlled studies when Ocaliva is commercially available.

After gathering feedback from regulators, our next step in that process is to close out the COBALT study. We will collect available placebo-controlled data from COBALT and include it as one element of a broader evidence package that will also include real-world data and outcomes data from the POISE long-term extension study. This evidence package will inform our dialogue with FDA and EMA as we work to fulfill our post-marketing commitments and obligations. We expect the data generation process to take several quarters and plan to submit this data package in 2022.

And on that note, we're proud to share today that one of our abstracts have been selected not only for a late-breaker podium presentation at The Liver Meeting but as a Best of AASLD 2021 abstract. The abstract is entitled "Patients with primary biliary cholangitis treated with long-term obeticholic acid in a trial setting demonstrate better transplant-free survival than external controls from the global PBC and U.K. PBC study groups." We are all excited about sharing these data with you on November 15.

Ocaliva remains the only second-line agent approved for use in PBC and continues to demonstrate benefit to patients with this devastating disease. We are committed to working closely with regulators to come to a resolution regarding our post-marketing commitments, and I'm encouraged by the progress thus far.

Turning to our pipeline. Our Phase II OCA plus bezafibrate trial is continuing to enroll outside the U.S. As we've shared previously, published data supporting the benefit of bezafibrate in PBC are encouraging and reinforce the potential for this novel combination to reduce elevated alk phos and bilirubin associated with improved survival. We plan to study a broader range of doses of the combination in an additional Phase II trial that will be initiated in the U.S. We remain committed to progressing therapies for individuals living with PBC.

Additionally, our Phase I study of our next-generation FXR agonist, INT-787, is ongoing. We plan to select a target indication for INT-787 in early 2022.

Overall, I'm pleased with the progress our R&D team has made, and I look forward to sharing updates on our pipeline programs as we kick off 2022.

Before I turn the call over to Andrew, I would like to let you all know that unfortunately, I will not be able to join the Q&A session today due to an unavoidable personal matter. I have asked Dr. Gail Cawkwell, Senior Vice President, Medical Affairs, Safety and Pharmacovigilance; and Dr. Paul Nitschmann, Senior Vice President, Regulatory Affairs, from my team to help answer your questions. I look forward to following up with you next week when I'm back in the office.

Now I'll turn the call over to Andrew for a financial update. Andrew?

Thanks, Michelle, and good morning, everyone. I would ask to please refer to our press release that was issued earlier today for a summary of our financial results for the third quarter ended September 30, 2021.

Beginning with sales performance this quarter, we recognized worldwide Ocaliva net sales of $92.8 million. This compares to $79.5 million in the prior year period and $96.6 million in the second quarter of this year. As a reminder, the third quarter of 2021 is the first quarter following the implementation of our new Ocaliva label, which was finalized in May of this year.

Our worldwide Ocaliva sales are comprised of U.S. net sales of $66.6 million and ex U.S. net sales of $26.2 million. This represents growth of approximately 14% and 25%, respectively, versus the prior year quarter. Our U.S. business performed well, as Linda discussed earlier. In our international business, growth over the last year was driven by increased demand and a benefit from country mix relative to prior year. Overall, results reflect a solid global business performance.

GAAP operating expenses for the quarter totaled $99 million, which was a decrease of $35.7 million versus the third quarter last year. Non-GAAP adjusted operating expenses were $89.6 million for the third quarter, a decrease of $28.5 million versus the prior year period. As a reminder, our non-GAAP adjusted operating expenses exclude stock-based compensation and depreciation.

Cost of sales for the third quarter were $0.7 million compared to $1.8 million in the prior year period. This decrease reflects the timing of purchases of API, packaging, labeling and other related expenses during the period compared to the prior year. SG&A expenses were $53.3 million for the third quarter, a decrease of $4.4 million from the second quarter of this year and a decrease of $17.3 million versus the third quarter of 2020. Our R&D expenses in the third quarter were $45 million, a decrease of $3.8 million from the same period last year.

We expect operating expenses will be higher in the fourth quarter of 2021 relative to Q3 and relative to what we anticipate for next year. This is due to a higher-than-normal spend in R&D as we prepare the data sets for release later this year and early next year, as discussed by Michelle. For the 9 months ended September 30, 2021, total R&D expenses were $133.6 million, with NASH-related R&D expenses representing approximately 2/3 of this cost.

We ended Q3 in a higher cash position than Q2, adding $3 million in cash from operations, which excludes the net impact of the debt exchange, new debt issuance and stock repurchase during the quarter. This increase was driven by our strong sales performance in both U.S. and international and our continued focus on managing operating expenses. Even with our large NASH R&D investments, we were cash positive for the second consecutive quarter, which highlights the profitability of our foundational PBC franchise. Our cash, cash equivalents, restricted cash and investment debt securities as of September 30, 2021, totaled approximately $428.8 million.

As a result of our strong global performance and with the knowledge that the impact of the label change will be on the low end of our expectations, we are increasing our Ocaliva net sales guidance to $355 million to $370 million from the previously shared $325 million to $340 million. We are also narrowing our operating expense guidance and now expect operating expenses to be between $380 million and $395 million as compared to our previous guidance of $380 million to $410 million.

Lastly, we were able to successfully execute a convertible note exchange to manage the near-term maturity of our debt. Between the debt exchange, a subsequent repurchase of $38 million in notes in private transactions, we lowered our 2023 maturity to $114 million, which allows us to manage our near-term debt with cash on hand. This gives us the ability to focus on growing our PBC business and generating important data in NASH to define our path forward.

Since joining Intercept earlier this year, it has been one of my top priorities to ensure that we remain financially strong and well positioned for growth. We have derisked our balance sheet significantly this year, and we will continue to utilize our cash prudently and ensure that we have a strong balance sheet to support our foundational PBC franchise, execute on our clinical and regulatory milestones and have the flexibility to expand our portfolio and pipeline.

Now I'll turn it back over to the operator to start the Q&A.

(Operator Instructions) Our first question comes from Ritu Baral with Cowen.

This is Anvita on for Ritu this morning. Congrats on the great quarter. We wanted to get some details on the progress of the reading of biopsies from the REGENERATE trial. Could you comment on how many biopsies have you reevaluated thus far? And how many patients do you have the 48-month follow-up safety data to date?

Yes. Thanks for the question. And thanks to the team at Intercept here who is doing a lot of work in the areas that you mentioned. So the work is ongoing as we stated in the prepared remarks and as we outlined last quarter. The biopsy reads are ongoing. The focus of the ongoing work as we really stay towards the discussion on potential accelerated approval has been reads on baseline and 18-month biopsies. So that's been the work. Again, that is ongoing. At the same time, the safety data, again, that we outlined last quarter is for the population, and the accumulation of that is more than twice the database that was in the initial analysis back in 2019.

So all of that work is ongoing. We are, as you would expect, monitoring that on an ongoing basis on a weekly basis. And as we sit here today, the work continues, and we do expect that work will continue and ultimately result in this data package that we've outlined being completed into the early part of 2022.

Our next question comes from Yasmeen Rahimi with Piper Sandler.

This is Swapnil on for Yas. Just one question for us. In your AASLD late-breaking abstract, you show that the event rates are significantly lower for the PBC patients. On OCA treatment, I think it's like 50-fold lower than the global PBC and U.K. PBC patients. So can you tell us how many of these patients were cirrhotic? And what kind of a read-through can we -- or like parallels can we draw to the ongoing NASH trial from this database?

So thanks for the question. I'll turn that over to Gail as, of course, we look forward to the important discussions coming at AASLD.

Yes. And thanks for the question. So in that study, the -- we looked at both an internal database, the POISE long-term safety extension study. That study was largely an earlier PBC population. And so at baseline in that study, there were a few but some cirrhotic patients. Over the course of following the study, there were more, but still the numbers of cirrhotic patients were relatively low in that study overall.

When we match to the external controls, we were very careful to both use the inclusion and the exclusion criteria from the POISE study, so we were comparing like-to-like; and to propensity score match to again provide an element of sort of pseudo randomization, as you can, in that setting. So we feel like the results are interesting, and we look forward to sharing them in more detail in just over a week at AASLD.

Our next question comes from Michael Yee with Jefferies.

My question is -- can you hear me?

Yes.

Yes.

Okay. Great. My question is on the F2, 3 analysis you guys are doing and continuing that work to early '22. My question is, with all of that reassessment and the inclusion of more patients, can you remind us, you would expect that the data could be the same, the effect could be better or greater if that could be less efficacious? Can you just remind us of how that could play out? And do you just expect to put out a press release on that information and we'll digest the data at that time and that's what you would be submitting to the FDA? Could you just maybe put some color around that and contextualize that?

Yes, Mike, thanks for the question. So I can start on that one. I think importantly, the new analysis, again, as the work is ongoing, is going to build on the prior interim analysis, which we think was a robust result with a robust methodology. Nonetheless, we are rereading with the new methodology of interpretation of those biopsies. We do believe this is a robust method as we've outlined, and it is a method that's consistent with the FDA's direction for a consensus approach. Of course, we won't have the complete picture until that work is completed into 2022. And of course, we'll share the appropriate information at the appropriate time once that work is completed. Importantly, we look forward to seeing the data set when it's complete.

Your next question comes from Brian Abrahams with RBC Capital Markets.

I was wondering if you could give us any update on this -- on the ongoing safety analysis. Our understanding is that some of the cardiovascular, renal and hepatic adjudication of AEs were going to start to -- that was going to start to roll in around now. So just wondering your level of confidence on the safety side. And as you look at the totality of efficacy and safety, what's going to be guiding your decision as to whether or not to go back to the FDA? Is there any situation where you would not approach the FDA for a pre-submission meeting?

So thanks, Brian. I'll start on that, and then perhaps Paul can remind everyone of the ongoing work in the areas on adjudication. As a reminder, the overall question that was posed by the FDA at the time of the complete response letter was around overall risk benefit. And so it's really been against that context that we first had the series of interactions with FDA that we outlined earlier in the year. And I think that put us in a position to make good decisions about which data we were going to generate, and now we're in that data generation process.

And obviously, it's going to be the comprehensive picture that we'll need to complete and then assess based on what we see in the data, obviously, the step after that, which would be an important step with data in hand. We would interpret the data, and the potential discussion of interpretation with the agency would be in a potential pre-submission that we would expect if we're in that path in the first half of 2022. So importantly, understanding and digesting the picture that we believe this data set will give us will be the important next move for us.

Paul, maybe you want to remind on the areas of adjudication, which continue to be part of the ongoing work here.

Yes. Thank you, Jerry. So you are right. We will have and are having adjudication ongoing in the cardiovascular and the hepatic and the renal arena. Really, at this point, there is nothing we can share about that. It's work ongoing. And as Jerry has highlighted a couple of times now, it's all about the benefit/risk that we will be able to assess early next year.

Our next question comes from Alethia Young with Cantor Fitzgerald.

This is Emily on for Alethia. I'm just curious about your latest thoughts on the REVERSE study and what data you're looking to see there given the new consensus approach.

So thanks for the question, Emily. And maybe just a couple of words from me, and then maybe Paul can remind of the study. We look at REVERSE, obviously, as an important data set. It's an important high-risk population. These are patients with cirrhosis that are well compensated. That work is ongoing in parallel. So the reads are happening as we've outlined. We are utilizing a consensus approach, again, consistent with what we talked about in the REGENERATE context.

I think that the last point for me is just that this is, again, ongoing work. We're monitoring closely. We do look forward to this important data set. If the data is positive, we think it gives us some real options. And again, importantly, this is a patient where the risk is high and the unmet need is clear and evident. So we look forward to understanding the potential role of OCA in this population.

Paul, perhaps you can give a thumbnail on the design as we look forward to the readout to come, and I believe there is additional information at AASLD on the REVERSE study design.

Yes. Jerry, thank you. So as you said already, REVERSE is a study -- it's a Phase III study in 919 patients with NASH with well-compensated cirrhosis. The primary endpoint is histology at 18 months and looks for a greater or equal than one-stage fibrosis improvement. And as you said, Dr. Ratziu will have a poster at AASLD to describe the study. The study uses 3 dose groups. One is a straight 10 milligram. One is a titration arm of 10 going to 25, and it's placebo-controlled.

Our next question comes from Joseph Stringer with Needham & Company.

Question on PBC here. Just curious if you can give us a sense for what your current operating margins are, specifically for OCA and PBC. And maybe do you have an idea of what those could be sort of going forward? Do you see you could improve those over the next couple of quarters or couple of years?

Thanks for the question. We obviously feel good about the performance in PBC in the quarter. We have also described the fact that on a stand-alone basis, the PBC franchise is a profitable one.

Andrew, maybe you can give some additional color on that front.

Yes, certainly, and thanks for the question. So we don't break out the PBC business as a business per se. You can obviously see the sales and the cost of sales on our P&L because that's our only product. So those are clean numbers. We've also stated before that the majority of our R&D expenses are related to NASH. As of Q3 year-to-date, R&D expenses were $133.6 million. Approximately 2/3 of those are NASH related. So that should give you sufficient information to break out what the business would look like without the NASH significant Phase III trials that we're currently in the process of providing data for at the end of the quarter. Hopefully, that helps.

Our next question comes from Salveen Richter with Goldman Sachs.

Could you just help us understand what might be presented at the upcoming Liver Meeting and whether there could be any read-through here to the reevaluation data?

So Gail -- I'll turn that to Gail.

Sure. I'm happy to -- I'm happy to take that question. So I think as Michelle said initially, we're certainly excited that some of our data will be at AASLD, specifically the first PBC outcomes data with obeticholic acid. And as Michelle said earlier, accepted as an oral presentation, late breaker and that's for the Liver Meeting abstract. We'll have important new data on the biopsy reading methodology used in NASH. This is not data showing outcomes but showing how the biopsy reading methodology works, and we'll provide some transparency there.

And finally, we will also have some data on REVERSE methodology and baseline data, which will be in advance, of course, of REVERSE data release coming later. It's also gratifying that we saw several independent abstracts on obeticholic acid. This is notable once medicine is well established that people start doing independent research. And there were some interesting things there, for example, a Stanford University abstract that notes that liver transplant waitlist mortality amongst patients with PBC and decompensated cirrhosis is lower since Ocaliva approval compared to before Ocaliva approval.

So this is, of course, encouraging. While not definitive, it makes for a nice pairing with our own work on the POISE long-term safety extension and external control data. And I think we'll have to just see what else comes up at the meeting. But I think on the NASH side, there's a little of notable excitement and mainly work that emphasizes that NASH is certainly a hard field to be successful in the clinical trial setting.

Our next question comes from Eliana Merle with UBS.

Just on the NASH biopsy rereads as well as the additional patients, can you remind us what your plans from a statistical perspective are to analyze this data, I guess, on NASH resolution and fibrosis?

Thanks for the question. Paul, perhaps you can give a little reminder of the approach there or the primary endpoint.

Yes. Thank you, Jerry. Yes, we're really viewing this as a new analysis. It is a much more robust data set, longer patient follow-up, more patient numbers. As Michelle said, it's more than twice the patient exposure. And we're actually looking at over 600 subjects who have been on treatment for 4 years or more by now. So we'll -- and same with the liver biopsy, the efficacy analysis, we're really seeing this as a new fresh look at these data. I hope that helps.

Yes. Just, I guess, any commentary on the powering or the statistical sort of analysis in particular, if you can?

We'll completely replicate the analysis that went into the original interim analysis.

Our next question comes from Geoff Meacham with Bank of America.

It's Aspen on for Geoff. Just a couple on the pipeline actually. Can you talk about the decision to study a broader dose range for the OCA/beza combo? Is that to look at higher doses, lower doses, both? Is there any data that you've seen so far that's kind of informing that decision? Or is that maybe just part of the inherent protocol? And then for INT-787, can you talk about some of the target indications you're considering that asset that you're looking to communicate next year? Is that going to be dependent on the FDA feedback in NASH? Or do you already have like a set list that you're thinking about?

So Gail, perhaps you can start on the bezafibrate, and then I can comment on 787 afterwards. Thanks for the question.

Sure. Happy to do so. So on the OCA/bezafibrate combination and dose ranging, it's always important in Phase II to do thorough dose ranging. It's something FDA and other regulators absolutely expects, going from doses that show no efficacy that are that low to doses that are higher than you may intend. When you do a combination product, that adds a level of complexity, of course, because you're managing 2 doses. So our study is designed to meet regulatory requirements and regulatory needs and to ensure we have what we need to progress our program. And so it includes a full range of dose ranging.

So on 787, so the Phase I work is ongoing. We're progressing through the dose escalation work. We are looking with interest at several areas of unmet need, and I think doing the right work now to be in a position, as Michelle indicated in the prepared, prerecorded remarks, that we would expect to select that target indication in the first part of 2022. Again, focus for us is some interesting areas of unmet need that we feel that this compound may have an interesting role in. But some more work to do, and we'll come back next year as we've outlined.

Our next question comes from Matthew Luchini with BMO.

I just wanted to ask, I guess, about how to think about REVERSE in the context of REGENERATE. And I guess what I mean specifically is if, for some reason, REVERSE were to be successful but the reanalysis didn't pan out or give you the result that you're hoping for to move to support resubmission, would you consider moving forward with a more narrow label? How do we -- how should we be thinking about that type of potential scenario?

Yes. Thanks for the question. As I said earlier, REVERSE for us is an important data set for OCA, I think also for the field and clearly for the patients that are suffering. Our dialogue with the FDA this year that we've outlined in previous calls has been primarily focused on REGENERATE and getting ourselves to a point where we were able to outline the kind of data we felt appropriate to generate on REGENERATE, and now we're in that process now. I think as we get closer and work towards having the REVERSE data in hand, and once we have that data, we'll clearly be regrouping with the agency.

I think if the data is positive, it provides us good options in several different scenarios, and that's the way that we look at the data. Again, it's an important population. There's high unmet need. This is a patient group that in all of the customer work we've done over the years in NASH is one that tends to be of high concern, obviously, to the patients themselves but also to the health care practitioners. So we do feel if the REVERSE data is positive, we'd have some good optionality. We'll see how all the pieces fit together with data in hand.

Our next question comes from Thomas Smith with SVB Leerink.

Maybe just a follow-up there. As we think about the upcoming REVERSE trial readout, we've seen a pretty wide range of placebo response rates in the compensated cirrhotic NASH population. Can you provide any color on the trial powering and what you've assumed for placebo response on the one-stage improvement in fibrosis with no worsening in NASH primary endpoint?

Paul, perhaps you can pick up that one.

Yes. Thank you. The powering has been the standard alpha 0.05, and I believe this one was with 90% power to read significance. I do not have the details of what the expected placebo response was on hand.

Thomas, we can follow back up with you on that one, okay?

Okay. Yes, that would be great. And then maybe just one follow-up question. As we think about the MAA in Europe, I guess any additional color you can provide on the decision to respond to the day 180 questions rather than wait for the outcome of the U.S. data generation and the REGENERATE reanalysis would be helpful.

Thanks. As Michelle said in the prepared remarks, we are -- current plan, we're working towards the response to the day 180 questions this month. Maybe, Paul, you can give a summary of kind of the process as we move forward there. And again, for us, we'll work through the process as it unfolds here.

Yes. Thank you, Jerry. So purely hypothetically, obviously, CHMP at this juncture could choose to give an opinion based on our day 180 responses, plus or minus an oral explanation. They could -- although that is not very frequent, they could push us into another day 180 round of questions, which would allow us the ability to even further align our data sets between U.S. and Europe. And obviously, as always, applicants have the ability to withdraw at any point in time. Does that help?

Yes. No, that's helpful.

Our next question comes from Mayank Mamtani with B. Riley Securities.

Congrats, team, on tracking nicely on both top and bottom line and especially faring ahead of expectations relative to the reset last year. Just a quick question for Linda on the PBC dynamics. How should we think about the 2022 outlook here as we are nearing the end of impact in U.S. but maybe not so much in the EU? And maybe help us think about the new patients dynamic versus sort of now that you're in the role and you understand penetration -- market penetration and also impact from other clinical trials that are ongoing. And Andrew, if you can bring the picture together on this cash flow positive. Like can we see that kind of sustain over the next few quarters?

Okay. Well, thank you for the question. Obviously, we're very pleased with how the messaging and the education went on the label change and communication there. And I think that being able to do that in person with representatives that were familiar with our physician prescribing base and going out was very helpful in communicating. And the label also gave clarity on who was in and who was out. And as we stated, we believe that we're near the end of the transition by year-end on existing patients.

So we feel that that's pretty much through. And there shouldn't be -- as we look at the label impact in Europe in 2022, we don't have that label in hand, of course, but we would perceive that decompensated patients would also likely be not indicated further in that population.

And when we look at the impact, we have estimated 10% to 15% of our -- the population available, the OCA population. And what we're finding is it was really down on the lower end. And some of the discontinuations which we expected to see given we had a change in population were taking fewer doses, and that fewer doses are usually associated with decompensated patients. But what we realized in talking to our customers was that many of our customers were taking a cautious approach to patients who were compensated cirrhotics, and they, too, were -- some of them were on a once or twice weekly dosing. So we do feel confident that the right patients are coming off.

Now as I said in my previous comments, the focus now is very much on getting back to business and new patient starts. And we've seen some depression with that over the COVID period. And I think frankly, as people waited, they were aware of our upcoming label change as they waited to see what the clarity on the patient population would be. And that's very clear, no change in dosing, just one regimen and you can go from there. But the new data that we're sharing, new data drives, I think, conviction in a product and how can I use this product to help my patients when, frankly, we only have one second-line product, and that's Ocaliva.

So you look at the fibrosis data, and that came again from our POISE extended open-label extension, and you see in those patients a stabilization of fibrosis. When you have a progressive liver disease, this is an important element. When we talk to physicians, underlying -- it's not just about ALP, it is the underlying health of the liver and preserving that for as long as possible that resonates at the higher laddered up goal.

So you take that data. And now with this podium presentation data coming out, comparing a cohort of POISE-like patients, these aren't COBALT-like patients, these were POISE-like patients who are earlier on in the progression of their disease and start to get that information out at AASLD as a best of abstract, I think that you can see there's a fair amount of new communications that can go out to support the Ocaliva business. And we are very much looking at growth in the market and a return to growth beginning in 2022. Andrew?

Yes. Thanks, Linda. So I'll try to answer your question as best as I can. So first off, I'll just say, look, we're really happy with the sales performance, both in the U.S. and international, and with our ability to manage expenses. Two consecutive quarters of cash growth/neutrality is a terrific win for the company and I think, again, just highlights the profitability of our underlying PBC franchise.

We're not prepared to give guidance for next year, but I will make some comments. So in my prepared remarks, I mentioned that in the fourth quarter, we're going to be increasing expenses to help prepare the data sets that Michelle and various others have discussed on this call. But I also indicated that, that will be higher than what we've had this year and higher than what we expect next year. So what you can expect is us to continue to manage our expenses into next year prudently. Regardless of which direction we go with the NASH application to the FDA, we are not expecting an increase in expenses next year relative to this year. We also expect that our PBC business will continue to grow. So with those, we're very happy with where we are, and we'll likely give -- well, we will give guidance next year at the end of our conference call at the year-end. I hope that helps.

Our next question comes from Jay Olson with Oppenheimer.

Congrats on the quarter. You've spoken about running a profitable rare disease business in the event that NASH doesn't work out. Can you talk about the time line and gating factors that would lead you to exercise that option? And then maybe related to that, is there any color on when and under what circumstances you would consider pursuing a PSC indication for OCA? Or is that an opportunity you're saving for 787 or the OCA/bezafibrate combo?

Thanks for the question, Jay. As we've said a couple of times, which I think is the -- at the center of all this is that the dictated -- I'm sorry, the data is going to dictate our path forward, and our path forward in NASH ultimately be an important driver in the strategic decisions. As you can imagine with any company, it's important as you look at major milestones that contingency planning is ongoing.

I think importantly, as we've tried to remind this morning, we've been trying to take the right steps along the way this year to solidify the foundation with what we're doing from a cost management standpoint. Andrew outlined how we looked at the convertible debt and making sure that we're solidifying the PBC business. So all of this work is to ensure the right strong foundation for the future as we importantly get the data in hand to make the right decisions.

And I think I'm always encouraged by the fact that we have strength in this company to leverage. We are deep in the liver community. We know the players. I think another quarter of illustration of our commercial capability, the R&D expertise around liver and the success. So again, I think, for me, it's about ensuring that we're focused on the readouts. We're going to use the data to make the right decisions moving forward on behalf of our company and our shareholders, and that's really the way that we look at the next phase in the company. [The other question] was on PSC. Maybe you can...

Sure. I'm happy to take this. So with regards to PSC, let me start with your second part, which was about 787. As we said earlier, we're looking at a number of high unmet need areas. And I would certainly agree PSC is one of many high unmet need areas. But it's still ongoing work, and we will tell more about that next year after we've completed our work there. PSC, we were pleased. We ran a positive Phase II study with PSC with obeticholic acid, which was based on alkaline phosphatase reduction, and we saw nice alkaline phosphatase reduction. Unfortunately, PSC is an area where biomarkers are not as straightforward as they are in PBC or some other areas, which adds a degree of complexity in studying this area.

Our next question comes from Brian Skorney with Baird.

I didn't hear any questions on the REGENERATE reroute. So a question on that. So I understand the focus on sort of the fibrotic endpoint, but my question is more on the reread and whether or not you're looking at the NASH resolution endpoint in addition to the fibrotic endpoint. I'm just wondering if given the additional patients that are being evaluated, if even the absolute difference remains the same that we saw in the initial cut of REGENERATE, if that wouldn't power to statistical significance. I think the original p-value was 0.13 and then -- of 931. And just based on statistical protocol, are you able to evaluate NASH resolution for statistical significance? Or is any p-value on resolution nominal at this point?

Yes. So as Paul indicated earlier, the readout will be on the same 2 primary endpoints that the initial analysis was read on, which is in both the improvement of fibrosis with no worsening of NASH and the NASH resolution endpoint.

Paul, anything further on that? Obviously, as we said, it's a larger number of patients in this analysis than the original being read with the new methodology. Paul, anything you want to add into that?

Thanks, Jerry. Not really. As we said, the study hasn't changed. So the powering is identical to what it was. It is a larger patient population, a larger sample size. And therefore, you can draw conclusions from that as you will. But it's too early to speculate. We really need to wait until we see the data.

Thank you. This concludes the Q&A portion of the conference. I'd like to turn the call back over to our host for any closing remarks.

Yes. Thanks, everybody, for the conversation today. Maybe just to summarize what we shared today. I feel good about the fact we've executed well against the objectives that we set out in the beginning of the year. Our global PBC business with Ocaliva continues to deliver, remains strong under the new label, and I'm confident in our ability to grow this business in the long term.

Second, we're on track with the important data generation in NASH, which I believe will allow us the ability to make the critical decisions regarding our path forward. The pipeline programs continue to advance. And importantly, we've made great progress strengthening our financial foundation, which will support a successful Intercept and allow us to focus on creating shareholder value over the long term. Definitely look forward to providing further updates as we continue what's a busy period across the clinical, commercial and regulatory activity.

And last and certainly not least, I want to thank the team at Intercept for their strong execution, their commitment and for all the work they're doing in their dedication to the patients we serve. So thanks a lot, and we look forward to more conversation along the way. Have a great day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.