Intercept Pharmaceuticals, Inc.
Q1 2018 Earnings Call Transcript

Published: 8 May 2018

[Operator:]

Thank you for joining the Intercept Pharmaceuticals First Quarter 2018 Financial Results Conference Call. All participants are now in a listen-only mode. Following opening remarks, Intercept's management will open the lines for a question-and-answer period. Please be advised that this call is being recorded at the company's request and a webcast of this call will be archived on the company's website for two weeks from today's date. I would now like to introduce Dr. Mark Vignola, Intercept's Executive Director of Corporate Development and Investor Relations. Please go ahead.

[Mark Vignola:]

Good morning and thank you for joining us on today's call. This morning we issued a press release announcing our first quarter 2018 financial results, which is available on our website at www.interceptpharma.com. Before we begin our discussion, I'd like to note that during our call and question-and-answer session today, we will be making certain forward-looking statements, including statements regarding the progress, timing and results of our clinical trials, including our clinical trials for the treatment of NASH, the safety and efficacy of our approved product, OCALIVA, the potential approval of OCA in indications other than PBC, the timing and potential commercial success of OCA and other product candidates we may develop, and our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. Some, but not necessarily all, of the factors that could cause our actual results to differ materially from our historical results or those anticipated or predicted by our forward-looking statements are discussed in this morning's press release and our periodic filings with the U.S. Securities and Exchange Commission including our annual report on Form 10-K for the year ended December 31, 2017. In addition, please note that OCA is an investigational product that has not been approved for use by any regulatory authority in any indication other than primary biliary cholangitis or PBC. No conclusions can be drawn concerning the safety or efficacy of OCA in other indications at this time. Today's call will begin with remarks from our CEO, Dr. Mark Pruzanski, followed by those from our President, U.S. Commercial and Strategic Marketing, Richard Kim; our President, International, Lisa Bright; and our Chief Financial Officer, Sandip Kapadia. We'll then open the call to take your questions. Let me now turn the call over to our CEO, Dr. Mark Pruzanski.

[Mark Pruzanski:]

Thanks, Mark. Good morning, everyone, and thank you for joining us on today's call. We accomplished a great deal in the first quarter of this year and are making good progress against the goals we have set for the company. We had several critical achievements during the first quarter. Highlights include the following. Today, we reported $35.2 million in Q1 2018 worldwide OCALIVA net sales and we continued to drive the launch of OCALIVA across our approved markets, which today include the U.S., Europe, Canada and Israel. We completed the label update for OCALIVA in the U.S., reinforcing appropriate dosing in PBC patients with Child-Pugh Class B or C or decompensated cirrhosis. And we announced our Phase 3 REVERSE trial, evaluating the efficacy and safety of OCA in NASH patients with compensated cirrhosis. Additionally, just after concluding the quarter, we successfully raised gross proceeds of $272.5 million in a public offering and concurrent private placement of our common stock to support our working capital and ongoing commercialization and development program investment requirements. We're really pleased to get the support of those close to the company, including several of our board members and other large shareholders, myself included, who together contributed more than $100 million of this raise. Last, we are coming to you after a strong showing at the EASL meeting just last month in Paris where several important OCA abstracts were presented. As we look ahead, there are two key priorities we will continue to focus on this year

[Richard Kim:]

Thanks, Mark, and good morning, everyone. We reported $28.5 million in net U.S. OCALIVA sales for the first quarter, down from the fourth quarter in 2017, reflecting a relatively flat Q1 prescriptions and a higher gross-to-net as we see across the industry to start the year. The first quarter was a key transitional one for us, driven by the FDA's update of the OCALIVA label in February. While our team has been engaged with physicians regarding the importance of correctly dosing OCALIVA in PBC patients with Child-Pugh Class B or C or decompensated cirrhosis in September, the updated label itself marked a crucial step in rebuilding confidence and clarity with our stakeholders. As we have moved out of the first quarter, we are excited that our conversations can now focus on the unmet medical need in PBC and what OCALIVA can bring to patients with an inadequate response or who are intolerant to UDCA. We did see softness in our sales to start the year, both prior to the label update and for a period of time afterwards. However, as the quarter progressed, we observed a general stabilization in our IMS TRxs, and most recently, we're starting to see some lift in new patient initiations and TRxs are also beginning to build. While we'd like to see our prescription trends return to the slope (00

[Lisa Bright:]

Thanks, Richard, and good morning. With over a year behind us since regulatory approval in the EU and Canada, we're encouraged with our international launches. Following rapid pricing and reimbursement across most of Europe, including Spain earlier this year and private coverage in Canada, we're beginning to see the impact of the sequential launches. In Q1 international OCALIVA net sales were US$6.7 million. The majority of sales continued to be in Germany and France, however, both Canada and the U.K. are now also making meaningful contributions. Over the last few months of last year, we were focused on proactively reinforcing the importance of appropriate dosing in patients with hepatic impairment in line with the SmPC. In February this year, following discussions with the EMA, we mailed the Dear Healthcare Provider Letter to over 67,000 physicians and pharmacists in Europe to further communicate this, and we continue to outreach through our medical and commercial teams. In parallel, the EU label has been updated and is now available on the EU Commission website. All together, this appears to have provided good reassurance and will be an important step in providing confidence and clarity. So whilst it's early days, we're optimistic about our international growth this year, and I'd like to provide a few more details. Our most recent market research conducted from November last year to January this year suggests that 85% of current prescribers intended to prescribe more OCALIVA in the next six months. This reinforces what we hear anecdotally that physicians prescribing OCALIVA are getting good results for their patients. And in fact, since December, we have seen a significant increase in new prescribers across the EU and Canada, reflecting not only the impact of new country launches, but also an increase in the breadth of prescribing. Consequently, we've seen new patient growth in the first quarter. In our market research amongst our target current prescribers who haven't prescribed yet, over 60% intend to start prescribing in the next six months, and we also continue to identify other important prescribers outside of those main centers. Finally, in Canada, we expect to gain public reimbursement in the summer and therefore expand patient coverage beyond the current 40% of those who are covered by private insurance. So, in summary, our commercial and market access teams are doing a great job executing on our ongoing launches, and our international region should make a meaningful contribution to our global growth for this year. And with that, I'd like to turn the call over to Sandip.

[Sandip S. Kapadia:]

Thank you, Lisa, and good morning, everyone. Please refer to our press release issued earlier today for a summary of our financial results for the quarter ended March 31, 2018. I'd like to take the opportunity to give you an update on our Q1 2018 results, our cash position and provide financial guidance for 2018. We've recognized $36 million in total revenues in the first quarter of 2018, including $35.2 million of OCALIVA net sales. OCALIVA net sales comprised of U.S. net sales of $28.5 million and ex-U.S. net sales of $6.7 million. As you heard from Richard and Lisa, Q1 was a transitional quarter with the label update and can serve as a good basis for future growth. As we expected, based primarily on the impact in the first quarter of increased gross-to-net deductions related to annual resetting of deductibles and Medicare Part D coverage gap, total gross-to-net deductions for the quarter were towards the higher end of our previously communicated 10% to 15% gross-to-net range. Our GAAP total operating expense for the quarter were $111.4 million and our non-GAAP adjusted operating expense, which excludes stock-based compensation and depreciation, were $97.8 million. Our cost of sales for the quarter were $0.3 million. As previously discussed, prior to the FDA approval of OCALIVA, we expensed costs related to the manufacturing and buildup of OCALIVA commercial launch supplies. As a result, we expect our cost of sales to remain negligible until the previously expensed supplies of OCALIVA are sold. We also recognized $7.5 million of interest expense for the quarter related to our outstanding convertible notes. Moving on to our cash position, as of March 31, 2018, we had cash, cash equivalents and investable securities available for sale of approximately $326.1 million. Subsequent to the end of the quarter, in April 2018, we completed a public offering and concurrent private placement of our common stock. We received net proceeds from the offering of approximately $261.4 million, after deducting underwriting discounts, commissions and estimated offering expenses of $11.1 million. And finally, moving on to our 2018 financial guidance, based on our transitional first quarter results and our outlook for the remainder of the year, we're announcing 2018 OCALIVA net sales guidance range between of $170 million and $185 million. We continue to expect gross-to-net for year to be in the 10% to 15% range. In addition, we are confirming our previously announced 2018 non-GAAP adjusted operating expense guidance range between $390 million to $410 million. For the full year, we expect interest expense of approximately $30 million, which includes both the cash interest and amortization component of our outstanding convertible notes. Finally, as a reminder, non-GAAP adjusted operating expense is a non-GAAP financial measure under SEC regulations. Please refer to our morning press release for an explanation and reconciliation of this measure. With that, I'd like to turn it over to the operator for questions. Operator?

[Operator:]

Certainly. Our first question comes from the line of Brian Abrahams from RBC Capital Markets. Your question, please?

[Brian Abrahams:]

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

[Mark Pruzanski:]

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

[Sandip S. Kapadia:]

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

[Richard Kim:]

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

[Brian Abrahams:]

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

[Mark Pruzanski:]

Yeah, Brian, I'll take that. So the physician feedback has been that the data are very, very positive. Granted, it's a relatively small number of patients, but, as you know, biopsy is not standard of care in PBC and it's actually difficult to obtain biopsy therefore in this population. We're really gratified to see that the large majority of patients who did undergo repeat biopsy did show reversal or at least stabilization of their fibrosis. And as I mentioned in my prepared remarks, you got to remember that this is already a high-risk segment of the population based on natural history data, published natural history data. It's a group of patients who would be expected to continue to progress histologically to cirrhosis and ultimately to liver failure. So, the physician community, I think, is very encouraged and as I mentioned also, our medical affairs team is moving to appropriately disseminate the data with a view to publishing it. I think the second part of your question in terms of read-through, I mean, again, we have fundamentally believed that FXR is an optimal receptor to target across the spectrum of liver disease. This is the second time that we've shown evidence of an antifibrotic effect after, of course, the FLINT data. And it gives us a lot of encouragement, therefore, in the observation that OCA is, in fact, a directly antifibrotic, irrespective of disease etiology. We'll learn soon enough first half 2019 when we turn the REGENERATE card over and hope to confirm then, again, what we saw in FLINT. So, overall, very encouraging data from our perspective.

[Brian Abrahams:]

Thanks so much.

[Operator:]

Thank you. Our next question comes from the line of Jay Olson from Oppenheimer. Your question, please?

[Jay Olson:]

Hey, guys. Thanks for taking the questions. Did you say in your prepared remarks that you would use the REVERSE trial to support your SNDA filing for NASH?

[Mark Pruzanski:]

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

[Jay Olson:]

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

[Mark Pruzanski:]

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

[Jay Olson:]

Okay. Thanks for the clarification on that.

[Mark Pruzanski:]

Yeah.

[Jay Olson:]

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

[Mark Pruzanski:]

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

[Jay Olson:]

Okay. Great. All right. Thanks for taking the question.

[Operator:]

Thank you. Our next question comes from the line of Alan Carr from Needham & Company. Your question, please?

[Alan Carr:]

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

[Mark Pruzanski:]

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

[Lisa Bright:]

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

[Mark Pruzanski:]

Thanks, Lisa. And Richard, on the second part.

[Richard Kim:]

Yeah. Hey, Alan. To say the slowdown was 100% to the label, I think, is hard to say, but I would say the vast majority. And the way we think about it is we had a very significant event of communications very early on in our launch ramp up here. So it has taken some time to sort of move forward from that. However, when you think about the unmet need, the unmet need that we hear is I believe still there. And as far as the patient numbers are concerned, we absolutely see the confirmation of the patient numbers that we have been seeing before. I think the one switch (00

[Alan Carr:]

All right. Thanks very much.

[Operator:]

Thank you. Our next question comes from the line of Salveen Richter from Goldman Sachs. Your question, please.

[Kevin Patel:]

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

[Mark Pruzanski:]

Yeah. Thanks for the question. So biomarkers of various kinds are ultimately critical to validate in the NASH population. And as you know, biopsy remains the gold standard, but all stakeholders are in agreement that we need to obsolete biopsy. That said, there's no currently accepted biomarker – non-invasive marker that can take the place of biopsy. We and other companies have incorporated a number of them into our trials. And I believe that with the plethora of Phase 3 data coming and other ongoing studies of various imaging and serum markers in particular, we will see one or more of these gain sufficient traction from both the regulatory and ultimately commercial standpoint to take the place of biopsy. At this point, I don't want to speculate on what those can be. We'll just have to wait for the data.

[Kevin Patel:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Michael Yee from Jefferies. Your question, please?

[Kelechi Chikere:]

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

[Mark Pruzanski:]

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

[Richard Kim:]

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

[Mark Pruzanski:]

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

[Kelechi Chikere:]

Got it. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Brian Skorney from Robert W. Baird. Your question, please?

[Unknown Speaker:]

Hi. This is Trevor Brown (00

[Mark Pruzanski:]

Yeah. So, REGENERATE is designed as a real-world study. So what that means is that patients are allowed to be on a statin or not on a statin at baseline. Investigators are encouraged to monitor lipids as they would in the real world and manage LDL cholesterol. They can do so by adding a statin, by increasing dose of the statin. So that's the answer to the design question. The second part of your question was about NGM, which we just reported out Phase 2 data at EASL showing a 50% or so LDL excursion. And I think what you're alluding to is that FGF19 is in the FXR pathway. What we've seen is an LDL signal that is significantly less – lower with OCA than the FGF19 homologue. It's unclear why that is. It's a different compound. But I wouldn't expect – we've now reported out in several data sets on the LDL signal, including the CONTROL trial, the Phase 2 trial we ran last year, where we demonstrated that a low dose of atorvastatin can reverse the LDL signal with our drug in the large majority of patients to below baseline. So I don't think there should be any read-through from the NGM data to what you'd expect to see at REGENERATE.

[Unknown Speaker:]

Great. Thanks so much.

[Operator:]

Thank you. Our next question comes from the line of Joel Beatty from Citi. Your question, please?

[Joel L. Beatty:]

Hi. Thanks for taking the question. Could you just discuss the next steps for PSC and where that's at and finding a path forward and clinical trial design?

[Mark Pruzanski:]

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

[Joel L. Beatty:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Jim Birchenough from Wells Fargo. Your question, please?

[Nick Abbott:]

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

[Mark Pruzanski:]

Yeah. Nick, so you're referring to the target PBC abstract presented at EASL showing the recapitulation of our Phase 3 data, essentially, on the benefit. Most of these patients – well, all of these patients had a diagnosis of PBC as far as I recall. With respect to compensated cirrhosis, remember that there's a healthy mix of patients with presumed cirrhosis in the Phase 3 trial. And I say presumed because they weren't necessarily biopsy-confirmed. Some of them were, but most of them non-invasively diagnosed with cirrhosis. So our belief is that the target PBC data are representative of the population that we see going on to OCALIVA and who were studied in our Phase 3 program.

[Nick Abbott:]

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

[Mark Pruzanski:]

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

[Nick Abbott:]

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

[Mark Pruzanski:]

I'll ask Richard to address that.

[Richard Kim:]

Yeah. It's a little bit hard. We filed, (00

[Nick Abbott:]

I think that we're – yeah. Okay, I'll come back to that. And then, Mark, just a last one. There was a competitor at EASL suggested there was an FXR binding site in the promoter region of the Alk Phos gene. And that was the reason they couldn't use Alk Phos as a biomarker in their trial. Given your deep expertise in FXR biology, did this present as a problem with OCALIVA development? And is this – well, I'll leave it at that.

[Mark Pruzanski:]

Well, look, I don't want to get too deep into the science here, but what you're alluding to is Novartis' presentation of interim Phase 2 data with their FXR, non-bile acid FXR agonist in PBC, where they actually shied away from using Alk Phos. I think there is evidence for what they're saying and we've seen – we've reported this before, in non-cholestatic liver patients, we do see an increase in Alk Phos that's pretty uniform. Typically stays in the normal range. And it is suggestive that there is an on-target increased synthesis of Alk Phos, which actually, to your question, makes the results that we've demonstrated and reported on in PBC all the more – and PSC, frankly, all the more impressive. Because the mechanism – we're going against that headwind of an on-target increase, slight increase, to show a very significant decrease in Alk Phos. I don't think it's going to change, from a regulatory standpoint, the dynamic with respect to Alk Phos. I think it would be very difficult to go to GGT, which was the primary readout in the abstract presented at EASL. There's not enough evidence for GGT, but it is intriguing that that was reported.

[Nick Abbott:]

Thank you very much.

[Operator:]

Thank you. Our next question comes from the line of Irina Margine from Cowen. Your question, please?

[Irina Margine:]

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

[Mark Pruzanski:]

Lisa, go ahead.

[Lisa Bright:]

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

[Mark Vignola:]

Operator, I think we have time for one more question.

[Operator:]

Certainly. Our final question comes from the line of Ying Huang from Bank of America. Your question, please?

[Ying Huang:]

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

[Mark Pruzanski:]

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

[Sandip S. Kapadia:]

Sure. Sure, Ying. Yeah. I think in the first quarter just generally what we had indicated is we do have a higher gross-to-net, and that's just by industry-wide sort of dynamic in terms of Medicare Part D, copay, assistance and so forth that impacts gross-to-net in the first quarter. So we had guided towards the higher end of our range. And that's the best of what we saw in the first quarter. So that was effectively the impact. Now, with respect to inventory, I mean, there's – sometimes it's like buildup towards the end of the year, but that's more because patients sometimes refill at higher rate towards the end of the year and that, but not anything that's dramatic. I think the key driver effectively is the gross-to-net.

[Mark Pruzanski:]

Thanks, Sandip. Yeah, and Ying, with respect to your question about the REVERSE protocol, look, REGENERATE, you're right, is a 72-week endpoint, which is identical to FLINT. We, of course, have said this before that we designed REGENERATE to reproduce FLINT in every way possible as our flagship Phase 3 trial. Over time, based on our own data and other reported histologic data sets, we've gained more and more confidence that we should see real changes histologically, including in fibrosis, at near-term time points. So that gave us the confidence to design REVERSE as a one-year trial as opposed to, well, really 72-week study. So there's not that much difference. And as I mentioned, our goal with REVERSE is to readout on a relatively timely basis to support broader market access, including patients with compensated cirrhosis.

[Ying Huang:]

Okay. Thank you.

[Mark Pruzanski:]

Thanks, Ying.

[Operator:]

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

[Mark Pruzanski:]

I just want to thank every one of you listening in today. As I mentioned in my prepared remarks, we look forward to remaining laser-focused on driving growth in our PBC franchise, advancing our leading Phase 3 NASH program, pursuing other progressive non-viral liver disease indications, and remain committed on behalf of all employees to meeting the high unmet needs of our patients with these devastating diseases. Thank you very much.

[Operator:]

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