Intercept Pharmaceuticals Inc (ICPT) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by, and welcome to the Second Quarter 2021 Intercept Pharmaceuticals Earnings Call. (Operator Instructions)

I would now like to hand the conference over to your speaker, Lisa DeFrancesco, Senior Vice President, Investor Relations and Corporate Affairs.

Thank you. Good morning, and thank you for joining us on today's call. This morning, we issued a press release announcing our second 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 this call, we will be making forward-looking statements, including statements regarding our approved product and clinical development programs, 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 prepared remarks from our President and CEO, Jerry Durso. And today, you will hear from a number of new members of the Intercept leadership team, including Chief Commercial Officer, Linda Richardson; President of Research and Development and Chief Medical Officer, Dr. Michelle Berrey; Chief Financial Officer, Andrew Saik; and Dr. Gail Cawkwell, Senior Vice President of Safety and Pharmacovigilance, will also be available for Q&A. (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 second quarter 2021 earnings conference call. We embarked on 2021 with a focused set of objectives. And as we cross the halfway point of this pivotal year for Intercept, I'm pleased with the progress that we've made.

First, we told you that we would continue to drive our PBC business. In the second quarter, we delivered sales of over $96 million and another quarter of double-digit sales growth. We also worked with the FDA to finalize important changes to our Ocaliva label in the U.S. and began educating the market on the new prescribing information. This clarity on the label will now allow us to return our focus to supporting the long-term growth of this important foundational franchise.

Second, we told you we would execute on our clinical and regulatory goals. This includes, most importantly, progressing our clinical development program in advanced fibrosis due to NASH. We promised you an update on our NASH program in the third quarter, and I'm pleased to report that today, we're actively moving from seeking alignment and gathering regulatory feedback to data generation.

Now let me tell you exactly what that means. If you recall, in the beginning of the year we established a new team of internal and external experts and tasked them with instituting a process to gain alignment and feedback from FDA on a number of key items relating to safety, biopsy methodology and efficacy data.

As a leader in the NASH space, a disease with no approved medicines, our work and thinking around NASH continues to evolve. And our objective has been to gain as much support as possible from FDA along the way in order to decide on the data necessary to best address the FDA's questions around the overall benefit risk profile of OCA.

Since the beginning of the year, we've had frequent exchanges with the FDA and the overall engagement has been significant. Today, we believe we have gained enough insight from FDA in these critical areas to move forward on our plan. And with the addition of Dr. Michelle Berrey now leading the process, we have a very strong team to execute our next steps.

Based on the progress made in our interactions with the FDA throughout the first half of 2021, we're now generating what will be the largest data package ever produced in the NASH field. These data will build on the foundation established with the interim analysis of REGENERATE, the only positive Phase III data readout in patients with NASH. As they become available, we'll be evaluating safety and efficacy findings internally to inform decision-making about a potential resubmission.

On this morning's call, Michelle will share more details on the specific data sets we expect to generate. We anticipate the process could continue into the early part of next year. And if we believe the data support accelerated approval, our goal is to have a pre-submission meeting with the FDA during the first half of 2022.

We also told you that we would expand our portfolio by furthering our pipeline and looking for opportunities to leverage our strengths. I'm pleased to report that we have 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.

We've made substantial progress this year while simultaneously strengthening our leadership team. We expanded the responsibilities for our existing team members and added strong new talent to our team. You'll be hearing from several of our new leaders today, and we look forward to meeting with all of you in the coming weeks and months.

Importantly, we reported our first cash-positive quarter in the history of the company in the second quarter. As it's still early in the Ocaliva label update process, we've reiterated our financial guidance and ended the quarter in a solid cash position. We're well positioned to focus on the next phase of the journey for Intercept as we continue to execute against this year's objectives and leverage the company's strong R&D capabilities and our commercial structure to drive long-term growth and shareholder value.

With that, I'm going to turn it over to Linda, who will talk about our commercial performance in the quarter and our progress on the implementation of our updated label for Ocaliva in the U.S. 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 remains strong, posting another quarter of double-digit growth and a solid performance for the first half of 2021. The performance was driven by increasing sales in the U.S. and a significant contribution from our international business.

First, let me talk about the U.S. You may recall, we received our updated label in late May and quickly began communicating this information to our key audience using a multichannel approach. Our top priority is to reach our existing prescribers first, and we are making excellent progress towards that goal. As of today, we have educated almost 2/3 of our existing prescribers, and a market research survey of the sample prescribers indicated 85% already have awareness of our new label.

Importantly, as we feel confident that we have effectively educated the majority of our existing Ocaliva writers in a given territory, we'll return to branded messaging and our prior strategy of driving growth in the community gastroenterology setting. This will be on a case-by-case basis, of course, and we anticipate that all territories will be switched over by the end of August.

In terms of prescribing trends, we are now just beginning to see the impact of our label update in the U.S. I would note that new writers, who are largely community gastroenterologists, generate a significant amount of our new business. Therefore, we would expect to see an impact on new patient starts in the third quarter of 2021.

As patients who are no longer appropriate for Ocaliva discontinued therapy, we also would expect to see some declines in refills and to see this fairly quickly, especially in patients with decompensated cirrhosis. We look forward to fully pivoting our team back to branded messaging for Ocaliva and educating our HCP community on developments regarding the management of patients with PBC.

To this end, we have several key plans in place to support our promotional efforts. First, late next month, we plan to deploy refreshed educational materials, highlighting the new data from our cohort of Ocaliva patients who remain in the open-label extension phase of the POISE trial. These data include information on fibrosis changes as measured by FibroScan and enhanced liver fibrosis testing. The patients participating in the open-label extension has been using Ocaliva for up to 6 years, and we look forward to sharing these data with health care providers.

Second, we will continue to discuss the benefits of adding Ocaliva therapy to the treatment regimen for patients who have elevated levels of ALP and bilirubin. Stable but elevated biochemical markers still place a patient at risk for negative outcomes according to data from the global PBC Consortium. Ocaliva remains the only second-line agent approved for use in PBC. In the U.S., we have a new label that clearly defines our patient population and simplifies dosing. And we have new information to share with health care providers who treat patients with PBC.

There are many PBC patients who remain eligible for treatment with Ocaliva, especially since the majority of patients do not have cirrhosis. We believe the growth opportunity is significant and attainable over the long term, as approximately 3/4 of the patients are non-cirrhotic, and we've been positioning Ocaliva for use in these less-advanced patients for some time now.

Moving to our international business. We have the strongest sales quarter in company history. This was driven by several factors, including increased access to institutions and prescribers for our sales force as COVID restrictions ease. We saw increased demand and adoption of Ocaliva when compared to last year, particularly in new patient starts. Multichannel execution has been a strong focus for us, and we see excellent engagement with our customers across regions, again, exceeding our expectations.

Our discussions with regulators regarding our post-marketing commitments remain ongoing. We have agreed with FDA and EMA to stop enrollment in the 401 study, which included the most advanced patients with PBC as these patients are now contraindicated by the new label. We are committed to working with the regulatory authorities to define next steps for the ongoing cohort trial and look forward to generating additional long-term data.

Importantly, as the field begins to evolve beyond ALP alone when evaluating therapies for PBC, we are well positioned to deliver important Ocaliva data, demonstrating the medication's effect on bilirubin, fibrosis and ultimately, outcomes.

I'd like to turn the call over now to Dr. Michelle Berrey to provide an update on our regulatory progress and our pipeline. Michelle?

Thank you, Linda, and good morning, everyone. I'm truly honored to be joining the team here today.

I'll begin with the NASH regulatory update that was promised for this quarter. We are pursuing an accelerated approval pathway for OCA as the first compound to treat advanced fibrosis due to NASH, a disease with increasing prevalence and no approved therapeutic options. The accomplishments by the Intercept team to date have been groundbreaking.

I believe the iterative process with the FDA this year has affected progress on 3 key items: one, the large safety database for OCA; two, liver biopsy interpretation methodology; and three, inclusion of 500 additional month 18 liver biopsies from REGENERATE.

First, we have more than doubled the safety data we have for OCA and NASH since the time of the initial interim analysis. Let me put that in perspective. For the interim analysis in 2019, approximately 1,900 patients had a median of 15 months of drug exposure. We now have just under 2,500 patients with a median of more than 30 months of exposure data. Approximately 650 of these patients have reached month 48 and are each contributing 4 years of safety data on OCA. With this significant increase in the amount of time patients have been on therapy, we are now analyzing over 6,000 patient years of safety data.

We've gained alignment with the FDA on the safety data cutoff and other details related to the analysis plan, as well as for adjudication of specific events, including potential liver events. As we analyze data over the coming months, we will pursue active dialogue with the FDA as needed. In summary, we've made significant progress on our evaluation of OCA's safety and tolerability profile in NASH, and we're excited to see data beginning in the fall and through the early part of 2022.

Second, liver biopsy methodology. With the increasing number of investigational compounds moving forward in NASH, the need for standardized slide preparation and reading methodologies has become a front and center issue. As the REGENERATE trial of OCA is the first and largest successful Phase III trial in NASH, it was critical for us to take a look at different potential methodologies for slide interpretation.

We have completed our review of the methodologies and the draft guidance, and have elected to move forward with a panel review. The details of our data-driven approach and the rationale or our panel of 3 independent pathologists has been submitted in an abstract for the liver meeting this fall.

We have standardized the preparation and reading methodology for all of our liver biopsies and selected pathologists whose fibrosis or NASH interpretations were consistent. Three pathologists on each panel will receive the slides simultaneously, and their analyses will be integrated using a consensus approach in line with the FDA's latest draft guidance.

For each biopsy, if the first 2 pathologists agree on their assessment, that is the result. If the 2 primary pathologists have discordant reads, the result from the third pathologist breaks the tie. Although we are continuing to discuss the details of the analyses, we believe we have enough insight from our discussions with the agency to begin reading liver biopsies.

And since this is a new methodology, we will be reading all REGENERATE baseline and month 18 liver biopsies. And because REGENERATE is an ongoing multiyear study, trial participants have continued to progress to month 18 and to undergo the scheduled liver biopsies. So the bottom line is that we will have an additional 500 month 18 liver biopsies in the REGENERATE database that were not included in the interim analysis, and a total of over 1,700 month 18 biopsies in the intent to treat analysis population.

As these liver biopsy and safety data become available in the coming months and into early 2022, we will be evaluating internally and making data-driven decisions on our potential NASH resubmission.

We also have a second large Phase III NASH study underway, REVERSE, studying OCA in patients with compensated cirrhosis. We will be utilizing the same reading methodology for the primary endpoint for REVERSE, utilizing a panel or consensus approach. Today, I'm happy to report that the reading of all of these biopsies has now begun.

As Jerry said earlier, we have now evolved from planning and gathering feedback to active data generation. The amount of data we are generating in NASH is unprecedented. We remain the front-runner in this space, and we will ultimately accumulate the largest data set in the field by far.

As a reminder, when we announced positive results from the first interim analysis of REGENERATE, OCA became the first investigational compound to demonstrate fibrosis improvement with no worsening of NASH in a Phase III trial. As we enter the second half of 2021, REGENERATE remains the only Phase III study in NASH to produce positive results. And every day, we collect additional efficacy and safety data that will provide a deeper perspective on OCA's benefit-risk profile.

In the U.S. our NASH program is focused on an accelerated approval submission. In my short time here at Intercept, I've been pleased with the interactions with FDA and the response to the agency's feedback following the Type A meeting last fall. I look forward to continued progress as we generate exciting new data in the second half of this year and into 2022.

As you know, we also submitted an MAA in Europe for NASH fibrosis. As we indicated last quarter, we continue to work toward aligning the timing of European regulatory data reviews with our new analyses. We requested and have now received a 2-month extension to our clock stop. Our application currently remains paused as we progress with the data generation activities that I reviewed for you today.

Turning to our internal pipeline. Our Phase II OCA plus bezafibrate trial is currently enrolling outside the U.S. Recently published data supporting the benefit of bezafibrate in primary biliary cholangitis are encouraging and reinforce the potential for this novel combination to reduce elevated alkaline phosphatase and bilirubin, improvements associated with improved survival.

As Linda reviewed for us earlier, Ocaliva remains the only second-line agent approved for use in PBC. Autoimmune liver diseases are increasingly recognized as substantial drivers of lost quality adjusted life years as they tend to mean young to middle-aged women in the prime of their productive years. We remain committed to progressing therapies for individuals living with PBC.

I'm also pleased to share today that we have initiated a first-in-human study for our next-generation FXR agonist, 787. Early data on this compound are exciting. We expect additional animal model data over the coming months that will deepen our understanding of this compound's profile.

Finally, as one of several new faces at Intercept, I'm excited about the opportunity we have to leverage our diverse skills, experiences and capabilities to shape the future of Intercept. Together, we are committed to embracing the challenges and finding new solutions to address previously untreated liver diseases where there remains a significant unmet need.

I will now turn the call over to Andrew for a financial update. Andrew?

Thanks, Michelle, and good morning, everyone. I am also very pleased to join the team on the call this morning. For reference, I would ask that you please refer to our press release that was issued earlier today for a summary of our financial results for the second quarter ended June 30, 2021.

Beginning with sales performance this quarter, we recognized worldwide Ocaliva net sales of $96.6 million. This compares to $77.2 million in the prior year period and $81.7 million in the first quarter of this year. Our worldwide Ocaliva sales are comprised of U.S. net sales of $68.2 million and ex U.S. net sales of $28.4 million. This represents growth of approximately 14% and 61%, 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 also had included benefit from country mix, foreign exchange rates and timing of inventory changes last year related to COVID-19. Overall results reflect solid global business performance.

GAAP operating expenses for the quarter totaled $95.8 million, which was a decrease of $33.5 million versus the second quarter last year. Non-GAAP adjusted operating expenses were $86.5 million for the second quarter, a decrease of $25.9 million versus the prior year period. Please note that we recognized an R&D tax credit of $10.7 million during the quarter, meaning that on a normalized basis, adjusted operating expenses were $97.2 million. As a reminder, our non-GAAP adjusted operating expenses exclude stock-based compensation and depreciation.

Cost of sales for the second quarter was $0.6 million compared to $1.9 million in the prior year period. SG&A expenses were $57.7 million for the second quarter, a decrease of $35.7 million versus the second quarter of 2020. The change was driven primarily by actions taken to reduce operating expenses relative to the prior period.

Our R&D expenses in the second quarter were $37.8 million versus $34 million in the same period last year. The increase was primarily driven by the recognition of lower U.K. R&D tax credits in the 3 months ended June 30, 2021. Normalizing for R&D tax credit in both periods, R&D expenses decreased by approximately $7.5 million, reflecting lower costs related to our NASH development program. For the 6 months ended June 30, 2021, total R&D expenses were $88.6 million, with NASH-related R&D expenses representing approximately 2/3 of this cost.

As a result of our strong business performance, we ended the second quarter in a higher cash position than Q1 and reported the company's first-ever cash positive quarter. Our cash, cash equivalents, restricted cash and investment debt securities as of June 30, 2021, totaled approximately $422.5 million.

Lastly, we are reiterating our guidance for full year 2021, including worldwide Ocaliva net sales in the range of $325 million to $340 million. While our year-to-date sales results were strong and are trending above expectations, we are just now beginning to see the impact of our label change in the U.S. Because the label update is still in its early stages, we are not prepared to change our guidance at this time.

We are also reiterating the non-GAAP operating expenses in the range of $380 million to $410 million. This operating expense guidance factors in the incremental work in NASH that Michelle discussed earlier in the call.

It is one of my top priorities to ensure that Intercept remains financially strong. We will utilize our cash prudently and ensure we have a strong balance sheet to support the growth of our foundational PBC business, execute on our regulatory milestones and have the flexibility to look for opportunities to grow and expand our business.

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

(Operator Instructions) We have the first question from Michael Yee with Jefferies.

Nice to hear Michelle. I think everybody knows Michelle, so it's great to have you at Intercept. We had 2 questions. One was on the reread and analysis of the pivotal study. Can you just clarify, you're going to reread everything baseline, endoscans? There's more patients now at 18 months and you're just going to report out that data because technically, that data could change, right? So can you just clarify how that will play out? And what happened, you're just going to put out the data and then tell us if it gets better, stay the same or is worse?

And then the second question is on the F4 study, same type of thing. I think you made some changes to that study previously, but maybe just talk a little bit about how you're handicapping that result and how you expect that to read out.

Okay. Mike, thanks for the question. I like you are happy to have Michelle on the call today, so we will turn your questions right to her, I think.

Yes. So thanks, Mike. Nice to hear you voice. Really great to be here today. So to your first question on the reread, yes, we now have disclosed what we are going forward with or our consensus read with the pathologists. As you know, historically, really over many decades, we've relied on a single pathologist, sometimes 2 pathologists, and we have heard from the regulators that, that raises some questions about discordance. They have been recommending in their draft guidance consensus, but really didn't give specifics on what that meant.

We have gone forward, and we'll be disclosing details around that hopefully at the liver meeting this fall on our plan, which is to use 3 independent pathologists. So they will all be receiving those biopsies simultaneously. And then we will, as we get their reasons, the first 2 primary pathologists, if they are aligned on their read on the slides and that's the answer. If they have 2 different reads, the third pathologist breaks the tie. So simply stated, that's our plan to get to the consensus.

It will create a new data set. So because this is a new methodology and one that we believe increases the sensitivity, we'll go into the details, again, at the liver meeting, we are excited to be implementing this new methodology. So we did want to read all of the baseline slides, all the month 18s. So that's over 1,700 biopsies at baseline in month 18.

I think on your question about REVERSE was about the patient population, so that's an F4 patient population. And again, that methodology would be used for those slides as well. We did have some changes on the timing of that biopsy, so that went from a month 12 to a month 18. And we'll, again, be using that same methodology. Those slides are going to be red in parallel to the REGENERATE. So we expect the timing of those should come pretty close. But until we get a little line of sight on how long it takes for the pathologists to get through all these biopsies, really can't give any specific guidance. We'll certainly be updating once we see what their cadence is on reading these slides.

Okay. Just to be clear, the timing of this would all come out kind of around the same time as your base case, which is by year-end for both studies?

We can't really give you guidance on that until we see what the timing is. Again, with pathologists, we're reliant on humans. So again, until we get some idea what their pace is.

Mike, just to clarify, as Michelle indicated, we'll be reading the 2 studies in parallel. The REGENERATE data set is obviously a lot larger. We do continue to expect to see the REVERSE top line by the end of the year. However, as Michelle indicated, we'll get a little more insight on the time for the totality of those REGENERATE reads as we progress through the process here.

Our next question comes from Alethia Young with Cantor Fitzgerald.

Welcome to all the new faces, we look forward to working with you guys. One, I guess this is a philosophical question, but just kind of as you work through this process. Do you feel -- like how much do you feel about this issue with being first-in-class versus a potential kind of long-term kind of risk-benefit concerns of OCA? And then just following on the question that was asked previously like -- so when we see the kind of new biopsy review, is it possible the efficacy will change that you'll see? I mean I would doubt that it would probably be the exact same, and so is that the efficacy now that the FDA will be considering in their base and also along with the risk?

Yes, Alethia, thanks for the questions. Maybe I'll start on the first one and then maybe Michelle on the second one. I mean, obviously, we're continuing to progress with a dual objective. There is an unmet need out there, so our intention to do our best to meet that unmet need on as expeditious a path as possible is one of the objectives. At the same time, ensuring that we're moving forward and ultimately have a data set here that will allow us to have -- be in the best position to have the strongest understanding of risk-benefit as we regroup on that discussion with the agency.

In terms of the question first-in-class, I mean, I think we want to make sure that we're also not losing sight of the fact that we continue to believe the antifibrotic benefit that we've seen in the previous analysis is a key element of the benefit and is a potential differentiator from some other compounds that might be progressing that may not bring that benefit. So more to come here, but we stay focused again on that dual objective of yet moving forward as quickly as we can while at the same time trying to increase the ultimate probability of success and the important quality of that dialogue with the agency once we have some additional data in hand.

The second part of the question was about whether or not the new method could alter or provide new results. Michelle, maybe you can give some color there, please?

Yes. I don't think we expect these data to be exactly the same. But remember, we do see highly statistically significant and, we believe, clinically significant differentiation from the placebo cohort, even in the interim analysis. As you pointed out, this is a lot more data. And we believe by using this panel, we are getting a more consistent read across that. So we're sort of taking out some of the noise that we know you get with discordance. So we believe this will give us a stronger data set to be the basis of a potential resubmission.

Just one other point on the safety. Because we now have over 650 patients who've reached 4 years, so that additional large data set also will strengthen the ability for us to assess risk/benefit going forward with this submission. So we're excited to get these data in and look forward to sharing that with you guys as it comes in.

Our next question comes from Yasmeen Rahimi with Piper Sandler.

I would like to drill down on understanding a little bit more the discordance between sort of a single reader and 3 readers. When we think about the 2 end points, 1 point improvement of fibrosis and NASH resolution, can you give us a glimpse into, is the discordance more prevalent when we assess fibrosis versus NASH resolution? How does this discordance could contribute to differences in the placebo?

Yes. So thanks for the question. It's nice to talk to you today. So the difference between a single reader -- and again, we'll go into the specifics on our analyses at the liver meeting. We're hopeful -- again, that's been submitted as an abstract, so I can't go too much into the data behind that. But what we did see was that by using a panel, we do increase the sensitivity. And we believe that gives us a more consistent read on these data, whether that's a binary outcome, like whether there's ballooning or not, or on our fibrosis grade. So we do believe that this will give us a more consistent data set and one that we believe, again, will strengthen the risk-benefit assessment for us as we go forward with this accelerated approval data set.

And if I may just ask a clarifying question, out of the 500 additional biopsies read, can you comment on how many of those are on drug and how many are in placebo?

So the additions -- all of the patients are randomized across the 3 arms. So that's consistent, whether that was with the initial analysis or these additional 500. So it's a 1:1:1 randomization placebo, 10 and 25. So that would have carried forward to these 500 as well.

Our next question comes from Salveen Richter with Goldman Sachs.

This is Sonya on for Salveen. Could you just help us understand the REVERSE data coming by year-end, will that -- would you fold that also into your resubmission package potentially, I guess, next year? And then also, could you help us understand what your expectations are into that top line rate?

Thanks, Sonya. Maybe I'll start on the first question, and Michelle can maybe get to the second one. I think as we've said previously, continues to be the case, the dialogue that we've had with the agency this year has primarily been around the REGENERATE data set. And so clearly, as we get closer to readout on REVERSE, we'll be having additional discussions on that data set. I think we continue to be excited about the potential to bring data in this important high-risk population.

If the study is positive, I think we have some good options for what we may do with that data, but we would like to have a more contemporary discussion with the agency, which we'll have as we get closer to the data set. I guess the second part of the question was any additional color on our expectations. I mean I just think, as I said, we're excited. It's an important high unmet need, and we'll definitely look forward to seeing the data set there.

(Operator Instructions) Our next question is from Brian Skorney with Baird.

Just when thinking about this consensus methodology that you're utilizing for the biopsy reading, I guess, first of all, does that -- is that a protocol change in REVERSE? So the primary analysis is going to utilize this as opposed to what's protocol defined. And is there any alpha hit the statistics as a result of that? And then in terms of the baseline analysis that you're going to do for REGENERATE, can a patient wind up, that was in the primary analysis being F2, F3, now wind up being F1 or F4? And how will those baseline patients be considered in the data at this point?

Thanks, Brian. Maybe we'll start on the REVERSE question first.

Yes. So we are rereading those biopsies. And so that was -- I thought that was for REGENERATE, just to make sure I want to -- make sure I'm answering your question, Brian. I think the question was as we're rereading these baselines, could those change? We -- and again, we're not going to go into all of the details on how we selected these pathologists, but we did find that there are pathologists who are very consistent with their reads of fibrosis and other pathologists who are very consistent with their reads on the NASH readings on steatosis, inflammation. So we are confident that this will be a minimum number, if there are any differences there on the baseline reads.

With this new methodology, it is important for us to have the same methodology across all of these analyses. So reading all of the baselines and with now 1,700 biopsies at the month 18, it's important to have that same methodology. That did not require a protocol change. We are specifying that in our statistical analysis plan, and again, have been in very frequent conversations with the agency about this and have an agreement with them that we can begin reading our slides with this new methodology. It is a new data set, so it is not an alpha hit. So again, this will be a new data set that'll be the basis for our potential resubmission.

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

Congrats on the progress, and welcome to Michele and Andrew and others. Curious if you could talk a little bit more about how you anticipate the biopsy reanalysis to impact the FDA's overall assessment of benefit risk. In other words, I guess, I'm curious on the interdependencies with respect to some of the other gating issues, like safety and outcomes. Are there -- has there been any specific bar for a delta on histological end points that's been discussed? And then secondarily, any reason to expect that the additional 500 patients who enrolled later in the study might differ in their characteristics or on the biopsy collection versus the original patients?

Thanks, Brian. I'll stick with Michelle on this one.

Yes, nice to talk to you today. So again, the important thing with this -- using this panel is, we believe, a much more consistent read across this. So we are using 2 different panels: 1 for fibrosis, 1 for steatosis. And we believe that, that new -- this new methodology with these pathologists will get us closer to truth, and you can't see my air quotes on that. But again, as this is a surrogate endpoint and we've long known some of the limitations of liver biopsies, we believe this methodology gets us closer to that truth of what we're seeing in those changes in the liver between the baseline and the month 18. What's the second question? Did you have a second question?

I guess I was curious if there's been a bar discussed -- a specific bar for the delta that you need to show on the histological end points? And then any reason the new crop of patients might be different?

Yes. So the new patients, the additional 500, are all F2, F3. That is our primary analysis population, and has been. You may recall, there were some F1 patients, exploratory analyses, but they're not part of the basis of our statistical power that was part of those original assumptions.

I don't believe that the statistics have been disclosed previously, I'm happy to get back with you if that's not the case, but I would say the study is very highly powered to detect what we believe will be both a statistically and a clinically significant delta. And I think you can see that even from the original interim analysis with these additional 500 patients. Again, we believe this is a much stronger data set that will be potentially supporting the accelerated approval.

Our next question comes from Ritu Baral with Cowen & Company.

This is Anvita on for Ritu. Congrats on the quarter. Just 2 questions from us. So firstly, just to confirm, have you obtained a definite alignment with the FDA for the resubmission? And secondly, what is the [part of the] safety data that will be needed for the resubmission?

Okay. Maybe I'll start on the question, the first one, and then we can come back. We -- it's been a considerable amount of dialogue with the FDA in the year-to-date. I think as you can -- as you heard in the call today, I think we have enough insight now to move forward and generate these large data sets we're talking about. I think we feel good that we align on the details of the safety update. And as Michelle indicated, that we have good agreement to start to read the biopsies with the approach that we proposed.

Of course, once we generate the data depending on what we see in the data, it's going to be an important next step then to get together with the agency and the potential pre-submission and discuss the data in advance of a potential submission. So that's the way we think about where we are in the process. We do believe, based on the work to do, the pre-submission, meaning if it happens, would be in the first half of 2022. And we'll continue to provide updates as we progress through the work that we've outlined this morning. Thanks, Annabel (sic) [Anvita].

Our next question is from Matthew Luchini with BMO.

This is [Jen] on for Matt. Two from me. Could you provide more color on what drove the second quarter [sales] and how you expect it to reverse going forward? Given that you guys maintained the guidance, is that all going to be falling to like the third quarter? Or is that going to be spread over the second half? And I have a follow-up after that.

Okay. Thanks for the question. I mean we do feel good about what happened in the second quarter with the $96 million roughly that we reported on Ocaliva. Andrew, perhaps you can give some insight to how we're looking at the year to go in the context of the sales guidance at this point.

Sure. Thanks, Jerry. Yes. Look, again, really happy with the $96 million. The business performance in the -- both the U.S. and international was terrific. I think the reason for the reiteration of the guidance is simply that the impacts of the label change have not been seen yet in the numbers, right? So the second quarter was unimpacted by the label change. We expect that to come in.

I don't think we want to give specific guidance on which quarter it's going to hit and when. We expect the impact to the last, call it, 3 to 6 months until we see it and hopefully start growing again at that point. So really, the reason for the reiteration was simply that we don't know. And it just seems not the appropriate time to change guidance, and we have such a big question mark out there.

Yes. I guess the only additional color that I might add is we did talk last quarter, for example, about the potential size of the patient population that might be impacted by the label change, particularly the group that now falls into the contraindication with the label update. And that range of roughly 10-ish percent to 15% range, we still believe that's a good estimate of the patients who will be now outside of the label. So that's one of the dimensions when we look at the potential impact that we'll be looking at monitoring and again, providing update in the future, as Andrew said.

Okay. Okay. Helpful. And then you said you've reset the biopsy of the REGENERATE data, are you guys implementing a sort of like prospective efficacy bar here? Or is that -- are you guys analyzing data [post-op] basis following the reads? And provide just a little bit more details on what we can be expecting from AASLD. I believe you guys are not going to be disclosing the new data, right?

Right, right. So what we will be going into you at the liver meeting -- again, hopefully, we have submitted an abstract and we don't yet know if that's accepted, but we're hopeful we'll be able to share the analyses that we conducted. So work that we did to show why a panel is superior -- is a superior methodology compared to a single read, which has been our historical gold standard for decades, as you know.

Again, we won't -- we'll go into some of the analyses that we did looking at these different consensus methodologies that are all acceptable from the FDA. Again, as kind of the front-runner, we felt it was really something that was incumbent on us to do these analyses to have a rationale for why we chose the panel approach, and we'll go into the data behind that rationale at the liver meeting.

But we're excited about the -- looking at those results as those come in over the coming months. Again, going back to the earlier point that we are using this new methodology for both the baseline and the month 18, and we do believe this will strengthen our data set. We have not talked about, again, the power of the study, except to say that it is a strongly powered study to be able to detect the difference. And that we -- again, we saw statistical significance even in the smaller data set that was conducted back in 2019. So excited about seeing that. We'll certainly disclose that when we have the final data.

Right. And then with the new reads, is going to be a prospective or [post-op] basis? Or are you guys not disclosing that yet?

Not sure I understand the question. We are looking both at those baselines in the month 18. And as those data come in, we are adding the additional 500 patients as they have reached month 18. But again, those data will be coming in over the coming months. I may not be understanding your question.

Our next question comes from Jay Olson with Oppenheimer.

Can you comment on whether or not the discordance between a single biopsy reader and the 3-person consensus panel is systematically biased in one direction? Or is that discordance randomly distributed? And then on the cash flow positivity, is that a goal that we should expect to see in future quarters? And can you talk about the time line to reaching profitability and whether or not that's a priority?

Thanks, Jay. Maybe we'll take the second question first with Andrew.

Yes. No, thanks for the question. Look, of course, we're delighted that we have the first-ever cash-positive quarter in the company. We're not guiding to that in the next couple of quarters. With the label change and the potential impact on revenue and continued spending on NASH, we would expect to go negative in the next 2 quarters. Obviously, long term, we're going to be a profitable company, and we're looking for that, but we haven't given guidance past this year, and we'll do that in the normal course when we get to year-end.

And on the second question -- well, I guess, it was your first question on discordance with the pathologist. Again, we'll share the data that we generated. But I think one thing that has been interesting to watch in this space for, again many decades, is even the discordance within a single pathologist. So on reread of biopsies, we do see changes in those reads.

And that's why one of the many data sets that pushed us for this panel approach, where we believe we can address some of the issues that are seen with a single pathologist or 2 pathologists, we believe that this improves the sensitivity, improves the accuracy and avoid some of the issues that we see with a single reader over time, where we do see drift in how they're reading, and we don't see that with this methodology. I can't really give you any more details on that until the presentation or we'll break our embargo and won't get to share all the data with you at the liver meeting.

Our next question comes from Steve Seedhouse with Raymond James.

Just wanted to clarify on the biopsy rereads if there are 2 primary endpoints, NASH resolution and fibrosis improvement, or if there will just be one, fibrosis improvement? And then on the resubmission data package, it's -- you mentioned you're going to have 650 patients through month 48. Didn't hear really any mention of a role for outcomes data and a resubmission. So I just wanted to be crystal clear on whether blinded to Intercept or not, outcomes data including those 48-month biopsies will be part of a resubmission or data that FDA reviews.

Yes. So on your first question on the primary endpoint, so it is improvements in fibrosis with no worsening of steatosis or resolution of steatosis without worsening of fibrosis. So that's that combined primary endpoint for the U.S. And then there are multiple secondary endpoints that are all read in a hierarchical manner. So again, if you hit statistical significance on the primary, you then move to all of those additional secondaries.

It is a large, large data set that will be generated. And of course, the largest number of patients that will be -- or the amount of data that we will be generating over the coming months will be the largest package created to date in NASH. So we're very excited to get that package, and we are looking through that. And again, that's the basis of our accelerated approval submission, we hope, in 2022.

The month 48 outcomes and the clinical outcomes, again, that would be the basis of a full approval. So that month 48 and looking at that preservation, the longer-term fibrosis benefit, that's not something that we are analyzing at this point. We're focused on an accelerated approval, which is again the baseline month 18 biopsies. The clinical outcomes month 48 would be analyzed as part of a full approval down the line.

Can I just follow up on the first answer because I think it might add more confusion than anything based on your answer. So there was an or function in there, and you mentioned resolution of steatosis and this is an endpoint that's changed over the course of REGENERATE. So can you just clarify, are there 2 separate primary endpoints: one being improvement in fibrosis without worsening of NASH, the second being NASH resolution without worsening of fibrosis? Or if you hit one or the other, are you hitting the primary endpoint?

Correct. So the latter. It is an or on the primary. And then with that, you can then move to the secondary endpoints. So yes, it is a very confusing set of analyses. Again, working with the regulators on this to make sure that we're demonstrating all of the things that they want to see.

I think we do have alignment that fibrosis is the most important aspect of that, and that's consistent across the U.S. and Europe. It is also going to be important for us to look at these additional components of steatosis, of inflammation, and they are addressed mostly in those secondary endpoints. But if you have resolution or improvement of fibrosis without impacting steatosis, that wouldn't surprise. So that's why we have those 4 in that primary end point.

And our next question comes from Thomas Smith with SVB Leerink.

Just on the expanded safety dataset and analyses. Michelle, I think you mentioned you've reached alignment with FDA on the adjudication of safety events, including the liver events. Can you just give us a little more color on how these are being evaluated? Is it a similar consensus methodology you're using for the histology end points? And I guess what was the genesis for coming to alignment on the adjudication?

Yes. No, Tom, so it's a good question. The adjudication was really about having an independent group of blinded clinicians who are reviewing these cases for us. So there are 3 different panels for this. I don't think it's anything out of the ordinary, there's certainly adjudication groups in other large studies. And in particular, where you have the organ of interest is one that is of high interest to the FDA, right?

So the liver -- the progression of liver disease is of increased interest in all of our therapeutic areas, not just the liver. So that's why it was particularly important to have an independent group of clinicians who are reviewing these narratives for the liver, for renal disease, et cetera. So it's a pretty standard adjudication group, and it was just about getting the alignment with them on which cases would be sent to this independent group.

Got it. Okay. And just a follow-up on that, Michelle, you mentioned, I guess, liver, renal and what's the third panel?

Cardiovascular.

Our next question is from Jon Wolleben with JMP Securities.

Just wondering, part of the conversation previously was about identifying the right patients and making sure you're able to get Ocaliva in the right NASH segment. I'm wondering if that conversation has changed with the recent interactions or if that's something that's going to be revisited when we have the reanalysis of these biopsies?

Yes, John, I think that with the data in hand, we'll be in the best position to regroup on that important discussion about the right population, thinking about some of the considerations potentially in market. So I think, again, the next step is the data generation, and all those important questions you outlined, we'll be in a better position to have.

And this ends our Q&A session. I would like to turn it back to management for their final remarks.

Thanks. And thanks for everybody for joining us today. From my perspective, our perspective, great progress so far this year. I think, importantly, a new leadership team in place, which definitely is going to help as we do the important work moving ahead. Secondly, our global PBC business delivered another strong quarter. We completed the label update in the U.S. and definitely now focusing on our -- back to our long-term strategy.

As you heard, we've had productive interactions with the FDA on the NASH side. We have the insight that we needed now to move forward to execution and to generate what will be the largest data package in the field of NASH. And this data will be key to drive the decision-making as we move ahead. And certainly can't forget the fact that we stay focused on the pipeline. We'll read out REVERSE by the end of the year, and we're making progress on the other products in our internal pipeline.

So definitely look forward to continuing to work, providing you the updates. We're going to go through what will be another important busy period on the clinical side, on the regulatory side and on the commercial side during the second half of the year.

And last and certainly not least, I want to thank the team at Intercept for all that they have done and continue to do with complete dedication to the patients that we serve in this area. So thanks, and we'll talk along the way.

And this concludes today's conference call. Thank you for your participation, and you may now disconnect.