Intercept Pharmaceuticals, Inc.
Q2 2017 Earnings Call Transcript

Published: 31 Jul 2017

[Operator:]

Thank you for joining the Intercept Pharmaceuticals' 2017 Second Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. Following opening remarks, Intercept 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. At this time I'd like to introduce Dr. Mark Vignola, Intercept's Director of Investor Relations. Please go ahead.

[Mark J. Vignola:]

Good morning and thank you for joining us on today's call. Before we begin, please remember we will be making certain forward-looking statements on today's call, including statements and forecasts regarding our future, financial, and operating performance; anticipated timelines for our development programs for obeticholic acid, or OCA; market estimates relating to the indications we are pursuing and our regulatory clinical and commercial plans, goals, and estimates, as well as other statements which relate to future events. These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in our reports filed with the SEC, including in Risk Factors section of our most recent annual report on Form 10-K and in Intercept's other filings with the SEC. We assume no obligation to revise or update forward-looking statements, whether as a result of new information, future events, or otherwise. OCA is an investigational product and has not been approved for use by any regulatory authority in any indication, other than primary biliary cholangitis, or PBC. No conclusions can be drawn concerning the safety or efficacy of OCA and those indications at this time. The format for today's call will include remarks from our CEO, Mark Pruzanski, our Senior Vice President and Head of U.S. Commercial, Richard Kim; our President of International, Lisa Bright; and our Chief Financial Officer, Sandip Kapadia. We'll then open up the call to take your questions. Rachel McMinn, our Chief Business and Strategy Officer, is also available to answer questions during the question-and-answer portion of the call. We would like to note that we have slides associated with the call today. These can be accessed via the webcast and on the Events sections of our IR website. At this time, I'd like to turn the call over to our CEO, Dr. Mark Pruzanski.

[Mark E. Pruzanski, M.D.:]

Thanks, Mark. Good morning and thank you for joining us on today's call. The second quarter of 2017 has been a significant one for Intercept. Today, we reported $30.4 million in worldwide Ocaliva sales, continuing our strong quarter-on-quarter growth. Our launch continues to progress well and we remain focused on our mission of bringing Ocaliva to patients with PBC who are in need. Ocaliva has been on the market in the U.S. for just over a year, and we believe we are just scratching the surface of the PBC market opportunity. Richard and Lisa will provide you with our U.S. and international launch updates after I conclude my remarks. Today, we also reported the two important clinical trials, CONTROL and AESOP met their objectives, which I'll go into more details shortly. In addition, and as previously reported, we completed enrollment of the interim analysis cohort of our flagship REGENERATE Phase III NASH trial in May, a major milestone for the company. We continue to expect results in the first half of 2019. We look forward to continuing our momentum in the second half of the year, focusing on two key areas; continued successful execution of our ongoing Ocaliva launch in PBC, and expansion of our NASH development effort, most notably with our anticipated near-term initiation of our Phase III NASH cirrhosis study. With that, I'd like to spend a few minutes on our two clinical data announcements. Before I begin, I'd like to thank the investigators and patients who participated in CONTROL and AESOP, as well as our internal teams, who worked tirelessly to achieve these important milestones. Starting with CONTROL, this trial was designed to prospectively evaluate the lipid metabolic effects of OCA and concomitant administration of statins in NASH patients with fibrosis and cirrhosis. The study design is described in the press release and is shown in the accompanying slides of our earnings presentation. As a reminder, a post-hoc analysis of the FLINT trial had shown that initiation of statin therapy reversed OCA associated LDL increases. So I'm pleased to report that CONTROL met its primary objective by showing the treatment with atorvastatin rapidly reversed OCA-associated increases in LDL to below baseline level. The majority of this effect was achieved with the lowest available atorvastatin starting dose of 10 milligrams, with incremental and sustained LDL reductions observed through the remaining trial period. There was a uniform 40 to 45 milligram per deciliter LDL reduction from baseline in the three OCA arms and a 48 milligram per deciliter reduction in the placebo arm. Lipid subfraction analyses show that OCA-associated changes in LDL were primarily driven by an increase in large buoyant LDL particles rather than small dense LDL particles, mirroring results we've previously published in healthy subjects. Consistent with our previous experience, pruritus was the most commonly observed adverse event in the study, with all such events reported by patients as mild or moderate. While there is no difference in incidents between placebo and the 5 and 10 milligrams OCA groups, just over half of the 25 milligrams OCA patients reported pruritus, resulting in two treatment discontinuations. Other treatment-emergent adverse events were similar across all groups, with no unexpected safety findings. Overall, 97% of patients who completed the double-blind phase opted to continue on treatment in the two-year LTSE phase. In conclusion, CONTROL has succeeded in demonstrating that statin therapy can have an important role in managing LDL cholesterol when co-administered with OCA in NASH patients with fibrosis or cirrhosis. This is an important finding, given that a majority of NASH patients are statin eligible and statins are a recommended therapy by both AASLD and EASL. Moving now to AESOP. First, a reminder that primary sclerosing cholangitis, or PSC, is a devastating disease with no approved therapy and a high unmet medical need. As in PBC, serum alkaline phosphatase, or ALP, is considered to be the most relevant blood biomarker informing the risk of long-term clinical outcome, liver transplant and death. However, PSC patients have a more complicated and variable disease course and often experience acute episodes of cholangitis that result in very pronounced spikes in ALP and other liver enzymes. The AESOP study design can be found in the press release and in the accompanying slides of the earnings presentation, and represents the first evaluation of OCA in PSC. I'm pleased to report that AESOP met its primary endpoint with 5 to 10 milligrams of OCA significantly lowering ALP after 24 weeks of treatment as compared to placebo. ALP was reduced in both OCA groups by a mean of 22% compared to an increase of 1% in the placebo group. We feel this result is highly encouraging, especially considering that about half of the patients were on concomitant UDCA therapy. Pruritus is a common symptom of PSC and, accordingly, was the most common adverse event observed in AESOP across all three study arms. Consistent with what has previously been reported in PBC patients, pruritus incidents and severity increased with OCA treatment in a dose-dependent manner. One patient in the 1.5- to 3-milligram OCA group and three in the 5- to 10 milligrams group discontinued due to pruritus compared to none in placebo. However, 97% of the patients who completed the double-blind phase in AESOP opted in the two-year LTSE, which is currently ongoing. In summary, we believe we've established a clear proof-of-concept for OCA as a potential treatment in PSC as second cholestatic liver disease. As a result, we now have increased confidence that OCA has an expansion opportunity in cholestatic liver diseases beyond PBC, and further underscores our view that indications such as PSC and others represent a sizable long-term market opportunity. Turning briefly to our NASH program, where we continued our strong momentum. REGENERATE is the first Phase 3 NASH trial to complete enrollment of a sizeable cohort of patients adequate to support initial regulatory approval. As a reminder, REGENERATE is evaluating 10 milligrams and 25 milligrams doses of OCA to explore the best balance of efficacy and tolerability. We're also expanding our commitment to NASH with a new Phase 3 trial in NASH patients with compensated cirrhosis, which is an important patient segment of unmet need. Finally, I'd like to mention an important organizational announcement. Consistent with our continued evolution as a company, we've decided to split into two separate roles, Chief Medical Officer and head of Research and Development. Therefore, we've initiated the search for a new head of R&D, and David Shapiro, who has been serving in both roles today, will continue on as our CMO. With that, I'll turn it over to Richard for the U.S. Commercial update.

[Richard Kim:]

Hey. Thanks, Mark, and good morning. It's been an exciting first half of the year. We're really pleased with our performance. In the second quarter, we achieved net U.S. Ocaliva sales of $27.9 million, which compares to $19.8 million in the first quarter of this year. As you can see on the slide, total Ocaliva prescriptions continue to growth steadily. On a four-week rolling average adjusted for the July 4 holiday, we are now averaging close to 400 weekly TRxs. Overall, we feel very good about the trends and continue to expect steady growth. That said, as is typical in the industry, we could expect to see some softening in the summer months. Demand for Ocaliva continues to be solid. And from our most recent wave of physician research, perceptions about Ocaliva are strong. Unaided awareness of Ocaliva continues to rise and has increased from 66% at the end of last year up to 76% in our target physicians. The perceived efficacy of Ocaliva from physicians has grown from 52% at the end of last year up to 63%. Top motivation to prescribe are based on strong beliefs on efficacy and no serious side effects. We are encouraged by the persistency and compliance with Ocaliva thus far, which is tracking in line or slightly better than our UDCA benchmark. We feel that the tolerability profile is very well understood and is seen overall as good and manageable. We're excited about the continued response about Ocaliva that we receive from physicians and patients, and we see several key drivers that will allow us to continue to build momentum in the second half. First, our team has enhanced our targeting initiatives by leveraging a unique lab data source that allows us to better identify specific physicians with PBC patients. We believe that this data will allow us to gain more new treaters in the second half of the year. Second, we've rolled out our new disease state messaging to better frame the unmet need in PBC and our enhancing brand messaging to support how Ocaliva can address the need in PBC patients with an inadequate response or intolerant UDCA. Finally, our compliance and persistency initiatives have been enhanced. Through our patient services hub, Interconnect, and the specialty pharmacies, we have increased the frequency of patient outreach with customized communications based on each patient profile. There are also more directed communications and resources to the physician offices to have a more team approach to patient management. We continue to be encouraged by the receptivity from physicians and patients about how Ocaliva addresses unmet need in PBC. We're also excited about our opportunities to support continued growth and to help us achieve our long-term goal for Ocaliva to become the standard of care for patients with an inadequate response to UDCA. Thanks for your attention, and now I'd like to turn the call over to Lisa.

[Lisa Bright:]

Thanks, Richard, and good morning, everyone. We've made tremendous progress in the last quarter across all of our early-launch countries. For the second quarter, we've recorded $2.5 million of international sales, driven predominantly by sales in Germany and France. As you'll remember, pricing and reimbursement generally takes 18 to 24 months to conclude across Europe, but I'd like to give you an update on the key successes in our larger countries. Following on from the early positive approval in the UK by NICE in April, our sales force has been working closely with local centers to ensure patients can have access once something is available. In both France and Germany, we've received positive assessments from the authorities and expect to conclude these negotiations by early next year. Outside of Europe, we've received conditional marketing authorization from Health Canada in May with the label closely aligned to that of Europe. We're very encouraged by the discussions with payers and expect access to around 40% of patients in Canada covered through private insurance by the end of the year. We expect public access will follow in 2018. That said, and as we've seen in the U.S., there's still much work to be done in educating physicians about PBC and clarifying the number of patients who are still inadequately controlled on UDCA, although the EASL guidelines and patient advocacy efforts have already been very helpful. Interest is very high and our medical teams have responded to more requests for information in Q2 than in the whole of 2016. And whilst we don't have patient or physician level data, recent research amongst our target physicians in Germany, France, UK, and Canada show spontaneous awareness of almost 80%. And close to 70% of non-users say that they're likely or very likely to prescribe in the next six months. As we go into the back half of the year, our teams remain integrated with the goal of continuing the momentum that we've built thus far. And with that, I'd like to turn the call over to Sandip.

[Sandip 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 June 30, 2017. I'd like to take this opportunity to give you an overview of our future results, our cash position, as well as guidance for the balance of the year. We've recognized worldwide Ocaliva net sales of $30.4 million, of which U.S. net sales for the quarter were $27.9 million, which reflects our estimate of filled prescription. Ocaliva ex-U.S. net sales were $2.5 million. We've recorded on our balance sheet $5.1 million of deferred revenues representing products sold to distributors, but not yet shipped out to patients. Gross to net improved in quarter two relative to quarter one, as insurance changes and deductible resets were not a factor. GAAP operating expense for the quarter were $111.4 million, and non-GAAP adjusted operating expense were $96 million for the quarter. The increase in non-GAAP operating expense relative to Q2 2016 reflected increased investments in the U.S. and Europe to support Ocaliva commercialization activity, as well as expanding clinical trials and activities to support OCA and NASH. We also recognized $7.3 million of interest expense from our outstanding notes during the quarter. We ended the second quarter with $550.3 million of cash, cash equivalent, and investible securities on our balance sheet. While we are not providing dose guidance at this time, we would like to reiterate our view that we expect steady quarter-over-quarter growth through the year-end. We expect Q3 to reflect the typical summer trends, with demand picking up again in the fall. We expect gross to net for the year to be towards the lower end of the 10% to 15% range. We are reiterating our guidance for non-GAAP adjusted operating expense for 2017 to be in the range of $380 million to $420 million. For the full year, we expect interest expense of approximately $30 million, which includes the amortization component of our outstanding convertible notes. Finally, as a reminder, adjusted operating expense is a non-GAAP financial measure. We anticipate stock-based compensation expense will represent most significant noncash item that is excluded in adjusted operating expense as compared to operating expense under GAAP. Please refer to our press release from earlier today for a reconciliation of our historical non-GAAP adjusted operating expense to GAAP operating expense. So with that, I'd like to turn it over to the operator for some questions. Operator?

[Operator:]

Thank you. Our first question is from Michael Yee of Jefferies. Your line is open.

[Michael J. Yee:]

Hey. Thanks. Good morning and congrats on the quarter. Great to see the continued progress. I wanted to ask just two questions on the studies you reported this morning. The first was just on the AESOP study. Could you maybe go into a little more detail on efficacy, anything else you were seeing there in terms of biomarkers? Is there a more complete story there other than just ALP that you could talk about, as well as next steps and timing? And then on the CONTROL study, I had some questions just incoming on the one patient death. Maybe you could just give a little bit of background there to explain that away a bit and that bit would be helpful. Thanks so much.

[Mark E. Pruzanski, M.D.:]

Sure, Mike. Thanks for the questions. So starting with AESOP, this is a top line release. Alk-phos was, as you know, the primary endpoint and so far is the only clinically-relevant biomarker that's been published on in this disease as a cholestatic liver enzyme. So we will be putting out the full dataset, including other markers, at an appropriate scientific meeting. And more importantly, in the near term, as I mentioned in my prepared remarks, we'll be taking the data, doing more analysis, bringing it to the KOLs and regulatory authorities, and discussing the path forward. But the bottom line is, we're really highly encouraged by the results that we're seeing and just want to stop with that. On CONTROL, the patient death that we reported this morning, this is a really unfortunate case of an individual who is quite sick and had a lot of clinical complications in the course of his disease. And exercising an abundance of caution given the death, we decided that we couldn't rule out that it was possibly related. However, as you saw, both the investigator and our independent DSMC determined that it wasn't related to study drug.

[Michael J. Yee:]

Okay. Thank you.

[Mark E. Pruzanski, M.D.:]

Isn't likely, though.

[Operator:]

Thank you. Our next question is from Alethia Young of Credit Suisse. Your line is open. Alethia Young - Credit Suisse Securities (USA) LLC Hey, guys. Thanks for taking my questions and congrats on the quarter. One, maybe can you talk about like did you – have you looked yet at like how much reduction was on top of UDCA, or if the people were not, did you see a different level of reduction? And then maybe frame the market opportunity in PBC. And as it relates to kind of your NASH cirrhosis trial, like what do you think the potential right doses might be there? Thanks.

[Mark E. Pruzanski, M.D.:]

Yeah. So on AESOP, good – you're asking about UDCA. And as I mentioned, about half of the patients who're on UDCA we stratified on, off. It is something that we're going to look into more detail. And just for reference, in PBC, we studied OCA as monotherapy in urso naïve or washout patients versus in addition to, and we saw a greater magnitude effects as monotherapy. So that data will be put out at the appropriate scientific meeting. On the market opportunity, we've reported before that we estimate the prevalence of PSC to be just about one-third that of PBC. But given that there are no approved treatments, this disease continues to represent one of the leading indications for a liver transplant out there. And we believe it's a roughly equivalent market opportunity to PBC. Right dose for the NASH cirrhosis study, as I've said before, we're going to be putting out details of this study once we initiate it. But just as a reminder, as I said in my prepared remarks, we are studying 10 and 25 milligrams in REGENERATE. And in our previous Phase 2 experience, we have underestimated the efficacy of our drug at given doses. And you could see from the AESOP study, efficacy even down at the 3-milligram level in that patient population. Alethia Young - Credit Suisse Securities (USA) LLC Great. Thanks.

[Operator:]

Thanks. Your next question is from Ian Somaiya of BMO Capital. Your line is open.

[M. Ian Somaiya:]

Great. Hopeful you, guys, can hear me, because I have a sketchy cell phone signal. First of all, congratulations. Two questions for you. One on the comments you made, Mark. Just trying to reconcile the comment of just scratching the surface in the opportunity versus slow and steady growth. If you could just help us maybe connect those two dots. And then on PSC, you've been quite clear in the past that the regulatory requirements are still TBD. Maybe if you could just walk us through what the next steps are as you begin your conversations with the KOLs and ultimately with regulatory agencies? Any framework as to time would be very helpful here. Yeah.

[Mark E. Pruzanski, M.D.:]

So let me just start off on PBC, and I'll hand over to Richard. The basis for my remark just scratching the surface is the fact that, as we've said before, there is a sizable population of PBC patients out there with an inadequate response to urso or who don't tolerate urso. And the only available option for those patients is Ocaliva out there. And as Richard mentioned, they and physicians have a positive perception of our product as we continue to grow. I'll hand it to Richard for his remarks.

[Richard Kim:]

Sure. Thanks, Mark, and thanks, Ian. Yeah, I think we're just – as we continue to grow, I mean, we've just been in the market for just over a year right now, so we've learned a lot about the marketplace. We're evolving our target physician base. There's a lot more we feel like we can do as people are just beginning to get their initial experience with Ocaliva. So, as I mentioned, several of the key drivers that we have, but I think we feel like there is still more work to do. But at the same time, this is an orphan disease, where we really do expect the growth to be more steady as well. So, Mark, maybe back to you for the next question.

[Mark E. Pruzanski, M.D.:]

Yeah. So, Ian, you asked about time course for clarification on regulatory path. I can't comment any further right now except to say that we are very – with the results now of AESOP, we will make due haste in analyzing and better understanding the results along with expert input and moving forward to have a discussion with FDA about this. And just to remind you and other listeners, I mean, all stakeholders are very seized of the unmet need in this population. FDA co-hosted a workshop, an endpoints workshop, just last year in this disease with AASLD and is very keen to define a regulatory path going forward.

[Operator:]

Thank you. Our next question is from Alan Carr of Needham & Company. Your line is open.

[Alan Carr:]

Hi and thanks for taking my questions. A couple about the two trials. One of them, I wonder if you can comment a bit about the baseline characteristics in the PSC trial. I know there might be an imbalance or two. I wonder what – if you can comment on that and then the shape of the curve over time in terms of response. And then in the CONTROL trial, you all have talked about the small dense particles versus the large buoyant particles. Maybe you can comment on that in terms of what you saw in the trial. Thanks.

[Mark E. Pruzanski, M.D.:]

Sure. Alan, I think you're referring in the PSC – in the AESOP study the fact that the baseline ALP values were not uniform necessarily. And I think this speaks to the large amount of variability in this population that I mentioned in my prepared remarks. And, in general, as you can see, if you recall the kind of ALP levels in PBC patients, you can see that these are markedly higher in this population. There was a lot of variability. We will be putting out a lot more detailed data at the appropriate scientific meeting. Shape of the curve, again, we're just not prepared to get into more detail right now, except to say this was a relatively short study. We did see a similar response trajectory that we see in PBC, not surprisingly, and you'll see it at the appropriate time. With respect to particle size, the subfraction analysis in CONTROL, again, as I mentioned, the increase that we see with OCA is primarily driven by large buoyant particles. This was in line with expectations, given our previous publication of subfraction analyses in healthy subjects.

[Operator:]

Thank you. Our next question is from Ritu Baral of Cowen. Your line is open.

[Ritu Baral:]

Hi, guys. Thanks for taking the question. One on CONTROL, one on AESOP, and one on commercialization, all pretty quick. Mark, as far as the CONTROL data, do you see any variability of LDL response? I'm particularly interested if there's any sort of patients that were not able to bring their levels back to baseline, essentially non-responders to the statin treatment once they've had an OCA excursion?

[Mark E. Pruzanski, M.D.:]

Yeah, Ritu, I mean, again, I'm not prepared to get into more detail right now. But what I can tell you is that we've come off the study confident that low-dose statin therapy co-administered with OCA can control LDL cholesterol in NASH patients.

[Ritu Baral:]

Got it. And in AESOP, you had some discontinuations despite the titration that was built into the protocol. Is there a way to manage pruritus better in these patients versus how we see it in PBC? Is there a better titration protocol that you're considering in for development for PSC?

[Mark E. Pruzanski, M.D.:]

Yeah. I mean, my general answer is, we've had a lot of opportunity to study pruritus management in the setting of PBC. We expected to see it in PSC, which is, of course, another cholestatic disease. And I think what we're going to be doing in analyzing the data very carefully with KOLs is determining the best course for further study in terms of dosing and titration. But remember that there are other effective ways to manage pruritus in – well, starting with PBC patients. And just as a general read-through, we are very highly encouraged by what Richard reported, which is that a year into launch we're seeing persistency curves matching or even better than UDCA, which is considered to be a very well tolerated therapy for PBC patients. So, I think globally the answer is yes with respect to PSC and in general.

[Ritu Baral:]

So there's no need, you think, to fiddle with the titration schedule in PSC as you see it now?

[Mark E. Pruzanski, M.D.:]

I think it's premature for me to comment on what kind of a dose schedule we're going to see in PSC. But...

[Ritu Baral:]

Got it.

[Operator:]

Thank you. And...

[Ritu Baral:]

Sorry. Go ahead, Mark.

[Mark E. Pruzanski, M.D.:]

No, no, no. I'm ready for your next.

[Ritu Baral:]

Oh. And last question for Richard, community effort. You mentioned this on the last call that you did, that there was going to be a new effort for community gastro outreach. How is that going and how does that relate to what you mentioned on today's call, which was the new messaging and outreach to new treaters?

[Mark E. Pruzanski, M.D.:]

Sure. Yeah. Great question, great memory as well. So as far as the community outreach is concerned, as I mentioned, we have some pretty unique lab data, which is allowing us to better pinpoint which physician offices to go see, where we believe there's a much higher likelihood to have PBC patients. So I think in general, it's gone quite well. We've been trying to increase our treater base. In general, we're trying to keep the message relatively simple for the community base, because there's a lot of other things that these folks are doing other than PBC. But I would say, initially the feedback has been very positive. We've had a lot of outturn at speaker programs as well. So we're encouraged and we're going to continue to adjust and evolve as we see new things as well.

[Ritu Baral:]

Got it. Thanks for taking all the questions, everyone.

[Operator:]

Thank you. Our next question is from Ying Huang of Bank of America Merrill Lynch. Your line is open.

[Ying Huang:]

Hi. Good morning. Thanks for taking my questions. Maybe, Mark, can you elaborate in AESOP trial, I know you guys looked at, for example, fibrosis. Did you see a reversal of fibrosis stage in the PSC patients? And then on the one case of death in the CONTROL trial, can you talk about the liver biochemistry measures for that patient? Did you see, for example, bilirubin or liver enzyme elevation from that patient? Thank you.

[Mark E. Pruzanski, M.D.:]

Thanks, Ying. So with respect to AESOP, just to let you know, this is a 24-week study and we didn't actually look at fibrosis. We were not looking at histology in this study, so I can't comment on that. With respect to the death and liver enzymes, we're not going to provide additional details. Suffice it to say that as we put in our release, this patient had a very complicated course and multi-organ failure, with cause of death listed as acute renal failure and liver failure. So there is a picture consistent with that.

[Ying Huang:]

Thanks. And then, Mark, maybe can you just talk on high level – I know you don't want to disclose lot of details, but on the other secondary endpoints, do they all trend in favor of OCA for the PSC trial?

[Mark E. Pruzanski, M.D.:]

Again, look, this is top line, Ying, and we put out the primary endpoint. We're still analyzing the data and we'll be reporting it out at the nearest opportunity in an appropriate meeting.

[Ying Huang:]

Got it. Thank you.

[Mark E. Pruzanski, M.D.:]

Look, we're – again, we're encouraged by the proof of concept that we've achieved.

[Operator:]

Thank you. Your next question is from Jay Olson of Oppenheimer. Your line is open.

[Jay Olson:]

Hi. Congrats on all the progress and thanks for taking my questions. I had a question on CONTROL. Can you just comment on what percent of patients achieved the top atorvastatin dose of 40 milligrams? And then on INT-767, is there any color you can give on timing or details of the Phase 2 study that you plan to start in the second half of this year? And then I had a commercial question.

[Mark E. Pruzanski, M.D.:]

Yeah. With respect to your first question, again, that'll be presented at an appropriate meeting. But, again, I think that the main takeaway from the top line data is that the lowest commercially available dose of atorva 10 milligrams was sufficient to reverse LDL in this population to below baseline levels, right? So, again, the message is that low-dose atorva, co-administered with OCA, can adequately manage LDL in most NASH patients, and that's very, very encouraging, given the fact that majority of these patients ought to be on a statin in any case. With respect to INT-767, again, our guidance is that we will initiate Phase 3 study in the second half. We'll be providing details on the study once we actually do that.

[Jay Olson:]

Okay. Thank you. And then in terms of the European rollout, which seems to be going well. The press release mentions that you're seeking regulatory approval in other international markets. Can you comment on which markets those are?

[Mark E. Pruzanski, M.D.:]

Lisa, could you take that?

[Lisa Bright:]

Yeah. So, I mean, predominantly, obviously, our focus has been today focusing on Europe. As you know, we've got approval in Canada, and in fact, just a quick heads-up on that whilst I have the opportunity. So things have been progressing pretty well there. And after approval by Health Canada, we actually received last week a positive reimbursement recommendation from the Canadian Drug Expert Committee, which, as you know, was a pretty rapid approval following regulatory approval. Beyond that, we are looking at other countries for regulatory approval, including Israel has been a key one that we've submitted – where we've submitted regulatory approval. And we'll continue to assess market-by-market opportunities as we go.

[Jay Olson:]

Great. Thank you very much.

[Operator:]

Thank you. Our next question is from Joseph Schwartz of Leerink Partners. Your line is open.

[Joseph P. Schwartz:]

Good morning. Thanks very much for taking the question. I was wondering if you could talk a little bit about the state-of-the-art when it comes to understanding of natural history and what's required to modify the disease course in PSC relative to what was understood before you undertook the POISE study in PBC. I know the FDA said that normalization of ALP would be a very important thing to see, but that alone would not be sufficient. So what do you think are the most important things that need to be shown to satisfy the FDA that you have a drug that could modify the course for patients with PSC?

[Mark E. Pruzanski, M.D.:]

Yeah, Joe, it's an important question for PSC patients. I think, look, you mentioned that alk-phos has been acknowledged as an important marker in this disease. That was confirmed by FDA. There are some publications attesting to that. I don't think normalization was necessarily the focus at the workshop last year, but clearly reducing alk-phos is important. I think, with respect to the natural course, natural history of the disease, as I mentioned in my prepared remarks, this is an aggressive variable course. These patients are very much at risk of developing hepatocellular carcinoma, cholangiocarcinoma. A good three-quarters of them have overlapping IBD, primarily ulcerative colitis. So a very, very serious disease and no effective options. I want to point out that even though half of the patients were on UDCA in the study, it's not recommended by AASLD in this population and, in fact, the high dose versus study had to be stopped, because it didn't – it actually had ill effects in the population. Nonetheless, it's the only – it seems to be the only option and a sizeable proportion of the population is taking it. So there's a very critical need here, and FDA has teased of this. We believe that we should be successful in being able to agree on an accelerated approval path. But ultimately, outcomes are going to be necessary.

[Joseph P. Schwartz:]

Okay, great. Thank you. And then, I know you didn't see much of a dose response with respect to ALP for OCA. But did you get more bang for the buck on any other important biomarkers? I know you don't want to reveal the data. But do you feel like there's a dose response beyond ALP here that's meaningful?

[Mark E. Pruzanski, M.D.:]

Look, I think that the important thing is that we did see a dose response here. This is the first time that we studied doses as low as 1.5 milligrams in a patient population. And the first time we've showed actually an ineffective dose of OCA at – 1.5 didn't seem to have an effect, but 3 milligrams did. And again, with respect to secondary markers, that'll come out at the appropriate scientific meeting. But I think that the appropriate focus here is on alk-phos.

[Joseph P. Schwartz:]

Great. Thanks for taking my question.

[Operator:]

Thank you. Our next question is from Joel Beatty of Citi. Your line is open.

[Joel L. Beatty:]

Hi. Thanks for taking the questions. The first question is on AESOP. Could you just comment on anything about bilirubin in this study, for example, and the severity of these PSC patients? Would they be expected to have a bilirubin above normal, and then did OCA have any effect?

[Mark E. Pruzanski, M.D.:]

Well, a lot of PSC patients do have elevated bilirubins. But again, as I just mentioned in response to the past question, we put out the top line data today and we will be presenting other data at an appropriate scientific meeting.

[Joel L. Beatty:]

Sure. And then the last question is on CONTROL and the 55% of patients in the highest dose arm that had pruritus. Would you just be able to characterize the severity of that at all and, for example, was it something that persisted throughout the study or was it just at one point of time?

[Mark E. Pruzanski, M.D.:]

Yeah. So, what I mentioned in my prepared remarks is that all pruritus reported by patients in CONTROL was either mild or moderate. So there are no severe instances. With respect to persisting, I can't comment today on that except to say – repeat what I said, which is patients voted with their feet essentially. And what's encouraging is to see that OCA was generally well-tolerated across the three-dose groups. We did have the two discontinuations, but the vast majority of patients on treatment opted to continue in the two-year LTSE phase. I'd take the opportunity to also say that this was a relatively small study, whose primary purpose was to focus on lipid changes. So I wouldn't overinterpret the pruritus rates in the study. And just for context, our ongoing Phase 3 REGENERATE trial, where we have more than 10x more patients, so well over 1,000 patients currently enrolled, while were blinded, we did take a look at overall discontinuations to pruritus, and it's very substantially lower than the imputed rate from CONTROL. So, again, we feel very good about overall tolerability of the drug in this patient population.

[Joel L. Beatty:]

Thank you.

[Operator:]

Thank you. Our next question is from Liisa Bayko of JMP Securities. Your line is open.

[Liisa A. Bayko:]

Congratulations on your data. Great to see. I just want to ask a little bit more about any work you've done (42

[Mark E. Pruzanski, M.D.:]

Hey, Liisa, you're in and out.

[Liisa A. Bayko:]

Can you hear me any better?

[Mark J. Vignola:]

Hey, Liisa, we can't. We can't hear. You're breaking up.

[Liisa A. Bayko:]

Okay. I'll ask you offline. Thanks.

[Lisa Bright:]

Go ahead.

[Mark E. Pruzanski, M.D.:]

No, we hear you – you are back.

[Mark J. Vignola:]

You're back.

[Liisa A. Bayko:]

Okay. The work you've done in the NASH population to understand how many patients are on statin therapy for their cardiovascular disease, and kind of what is the data that you've shown in CONTROL that imply about that group?

[Mark E. Pruzanski, M.D.:]

Yeah. As I mentioned before, majority of NASH patients are statin-eligible. I can't comment right now on exactly what proportion of NASH patients out there in the real world are taking a statin. But I wouldn't be surprised – this is true of any chronic disease population – to see undertreatment of these patients. And we're very happy if the results of CONTROL helped to drive improved treatment of this patient population in keeping, frankly, with AASLD and EASL guidelines. The majority of these patients would benefit from statin therapy, and it is generally safe and well-tolerated in these patients as well.

[Liisa A. Bayko:]

Okay. Great. Thank you.

[Operator:]

Thank you. Our next question is from Francois Brisebois of Laidlaw. Your line is open. Francois Brisebois - Laidlaw & Co. (UK) Ltd. (United States) Hey, guys. Thanks for taking the question. I just wanted to ask in terms of – I think Alan brought this up. In terms of large buoyant versus small dense lipids, is this something that's more and more accepted the difference between them in the medical community and when you speak to KOLs, or is this still kind of an area of debate?

[Mark E. Pruzanski, M.D.:]

To be very honest, I think that from a real world clinical standpoint, it's a little bit more of esoteric interest, right? When physicians manage their patients, they manage them by LDL levels and don't necessarily look at subfractions. So you will see some lipidologists out there and some evidence in the literature that small dense particles are relatively more atherogenic. But again, I think with respect to real world clinical management of these patients, it's probably a little bit more of esoteric interest. Francois Brisebois - Laidlaw & Co. (UK) Ltd. (United States) Got you. Thank you. And then quickly in terms of – this is probably more for Richard, but in terms of the sales reps, do you guys give an account of where we stand right now?

[Richard Kim:]

Yeah. We had mentioned previously, we have 45 territory business managers. We've actually upped some of it also with some contract sales focus as well. So we're a little bit north of that number right now. Francois Brisebois - Laidlaw & Co. (UK) Ltd. (United States) Okay. Great. And then lastly, just in terms of the CONTROL data, was it surprising to you guys that there was such a change between the 10- and 25 milligrams in terms of pruritus?

[Mark E. Pruzanski, M.D.:]

No. As I mentioned a couple of minutes ago, I wouldn't overinterpret this data is relatively small numbers of patients, and the primary purpose of this study was to study lipid effect. 25 milligrams is 2.5 times of the dose of 10 milligrams. But frankly, it's also really encouraging. As I mentioned, this is our first dose-ranging experience in this patient population at doses below 25 milligrams. It's highly encouraging to see that 10 milligrams was extremely well-tolerated. With pruritus, essentially no different from placebo, and we are testing this dose along with 25 milligrams in REGENERATE with the objective of establishing the best balance of efficacy and tolerability. But again, I mentioned that across REGENERATE, right now we're seeing significantly lower imputed discontinuation rates due to pruritus. Francois Brisebois - Laidlaw & Co. (UK) Ltd. (United States) Okay. Great. That's it for me. Thank you.

[Operator:]

Thank you. Our next question is from Jim Birchenough of Wells Fargo. Your line is open.

[Jim Birchenough:]

Hey, guys. Congrats on the quarter and thanks for fitting me in. Just a couple. Any plans to have a POISE-like natural history study in PSC? Any thoughts on you guys sponsoring that? Are you aware of anything like that that's being planned? And just going back to the one death in CONTROL, any implications from that event? It sounds like it wasn't drug-related, but just wondering if you've had discussions with FDA, if there's any risk that there could be any protocol amendments in future studies. Anything beyond just noting the event, any implications? Thanks.

[Mark E. Pruzanski, M.D.:]

Yeah. So, I think with respect to your first question on sort of a PSC super-group or global PSC, that is in the works, Jim. As I mentioned earlier, there's literature supporting the utility of alk-phos as a biomarker, but there's significantly less out there than for PBC. So that is definitely in the works, and we will absolutely be involved in that. With respect to the reported death in CONTROL, I think your question was implications of this. What I'll say is that, what is true, in general, in this patient population is that there's a reason that NASH is going to soon become the leading indication for liver transplant. There's a substantial proportion of this population that has advanced liver disease and is going to go into liver failure. This was an unfortunate case, the patient in one of our studies who died. And as I mentioned before, there are a number of different clinical complications involved. I think to that point, going forward in our NASH cirrhosis and, frankly, any study, we're going to ensure adequate monitoring of these patients and that every measure is taken to ensure the safety of patients. But in our trials and in general out there, you're going to see events like this.

[Jim Birchenough:]

Thanks, Mark.

[Operator:]

Thank you. And our next question is from Liana Moussatos of Wedbush Securities. Your line is open.

[Liana Moussatos:]

Thank you. Is there anything with the mechanism of action for OCA that's related to the elevation of a specific particle size or large particle size versus all sizes of LDL?

[Mark E. Pruzanski, M.D.:]

Liana, I think, given that we've now reproduced this in healthy subjects and in NASH subjects, the answer has to be yes, but frankly, we need to do more work to understand the mechanism at play here.

[Liana Moussatos:]

Thank you.

[Operator:]

Thank you. At this time there is no other questions in queue. I'll turn it to Mr. Pruzanski for closing remarks.

[Mark E. Pruzanski, M.D.:]

Thank you, operator. Well, today was a very special day for us. Another very strong quarter in our global Ocaliva launch, which, as mentioned, is progressing very nicely. Two studies that met their objectives and a lot of momentum in our NASH program. Thank you for listening and we'll see you next time.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.