Intercept Pharmaceuticals, Inc.
Q4 2017 Earnings Call Transcript

Published: 14 Feb 2018

[Operator:]

Thank you for joining the Intercept Pharmaceuticals' 2017 Full-year Financial Results Conference Call. All participants are now in a 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. I would now like to introduce Dr. Mark Vignola, Intercept's Senor Director of 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 covering our full-year financial results and providing business update which is available on our website. Before we begin our discussion today, please remember we will be making certain forward-looking statements on today's call, including statements regarding safety benefit and efficacy of Ocaliva, the commercial potential of Ocaliva, any future events that may be experienced by patients who use Ocaliva and the association of such events with its use, the results of Intercept's educational efforts with healthcare providers and other plan and ongoing initiatives, the dosing of Ocaliva, the efficacy and potential future use of Ocaliva for PSC, the potential results of the REVERSE and REGENERATE trials, our clinical and commercial potential in NASH, the commercial effect of the recent label changes for Ocaliva 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 U.S. Securities and Exchange Commission, including in Risk Factors section of our most recent annual report on Form 10-K and in 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’s investigational product has not been approved for use by any regulatory authority in any indication other than Primary Biliary Cholangitis, or PBC. No conclusion can be drawn concerning safety or efficacy of OCA in those indications at this time. The call will begin with remarks from our CEO, Mark Pruzanski, followed by those from our Senior Vice President and Head of U.S. Commercial, Richard Kim; our President of International, Lisa Bright; and closing by our Chief Financial Officer, Sandip Kapadia. We will then open the call to take your questions. We would like to note that there are slides associated with today's call that can be accessed through the webcast on the Events section of our IR website. 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 2017, despite it shaping up to a challenging year for the Company. I'm proud of the fact that we have continue to uphold our resolute commitment to patients and their physicians as the leading innovator in progressive non-viral liver diseases. We had several exciting achievements last year. Today, we reported a $129.2 million in 2017 worldwide sales with $37.3 million coming in the fourth quarter. In the U.S., we drove a strong Ocaliva launch trajectory and PBC and maintained momentum even during a period of uncertainty regarding the issues informing the label update. Internationally, we gained access for patients in a number of European countries and Canada in record time reflecting the value that the vast majority of payers described to Ocaliva or PBC. We also made solid progress in our development programs establishing proof-of-concept for OCA in another cholestatic liver disease PSC with the AESOP trial. While also reporting a successful outcome in the CONTROL trial in NASH. And of course, we completed enrollment of the interim analysis cohort in REGENERATE keeping us in the lead with the largest ongoing Phase III trial in NASH. 2018 will be a pivotal year for Intercept as we remain laser focused on the following priorities. First, growing our PBC franchise, second reinforcing our leadership position in NASH and third defining a path forward in PSC. Now some more detail on our PBC program. As you know a couple of weeks ago, we announced an updated U.S. label for Ocaliva, reinforcing appropriate dosing in PBC patients with Child-P Class B or C or decompensated cirrhosis. Such patients are at in advanced stage of their liver disease and represents approximately 2% to 3% of the PBC population. The label update was supported by extensive post-marketing analysis that has reinforced our conviction in Ocaliva safety profile and the benefit it provides in eligible PBC patients when used it as directed. Therefore, it is a critically important treatment option for the many thousands of PBC patients, who are inadequately addressed by the standard of care. Obviously, getting the label updated this just the first step. With this in hand, we now have the ability to reengage with our key stakeholders both physicians and patients and we intend to reinvigorate growth in the PBC business, which we believe continues to be a significantly underappreciated opportunity. For all of our [Technical Difficulty] population in our first full-year of launch. We believe there remains a very sizeable number of PBC patients, who can benefit from Ocaliva. Moving now to our work in NASH. We are hyper-focused on our global base treat NASH program now comprising our ongoing REGENERATE trial and the REVERSE trial, which we announced a couple of days ago. As we considered developments in the NASH therapeutic space over the past year with several other companies reporting program delays and Phase II disappointment. We are reminded of just how strong our competitive position is. As you know, OCA is the only FDA designated breakthrough therapy in NASH. It continues to be the only investigational drug that has shown robust efficacy on both of the two currently approvable NASH endpoints with the potential to be uniquely differentiated as first line therapy. Starting first with REGENERATE, our flagship trial and NASH patients with advance F2 and F3 fibroses. As a reminder, this trial is designed to read out on an interim analysis supporting initial regulatory approvals with continued follow-up for confirmation of benefit on clinical outcomes on a post-marketing basis. We remain on track for results of the interim analysis in the first half of 2019, while enrollment in the outcomes cohort continues. Second, earlier this week, we are pleased to announce our Phase III REVERSE trial. This is a randomized double-blind placebo-controlled multi-center study that is evaluating the efficacy and safety of OCA in approximately 540 patients with a biopsy confirmed diagnoses of compensated cirrhosis due to NASH. The primary endpoint is the percentage of patients with histological improvement in fibroses by at least one stage using the standard CRM scoring system and with no worsening of NASH after 12 months of treatment. The patients are being randomized to one of three treatment arms, once daily dosing of OCA 10 milligrams, once daily OCA 10 milligrams with titrations 25 milligrams a three months or placebo. We have begun enrolling the patients in REVERSE and will be conducting the trial in the U.S. in a number of other countries worldwide. We designed the study to focus on the patient population with compensated cirrhosis, but we have confidence in OCA’s ability to reverse disease course. The reversal of cirrhosis to an earlier stage of fibrosis is associated with very significant reduction in the risk of liver failure and all cost mortality. REVERSE is more than 90% of power with confidence in the studies outcome based on the fact that OCA demonstrated robust reversal of advanced fibrosis in the well-controlled FLINT trial. We intend to complete enrollment of REVERSE as rapidly as possible. With the expectation that the results of the trial will be supportive of broader market access in our NASH launch and to serve as the basis of approvals worldwide, which we generate and now reverse, we have expanded our leading NASH Phase III program with the probability of success based on a strong foundation of simply the most robust safety and efficacy data of any NASH program in development. And now a word about our broader cholestasis franchise. As the leading innovator in progressive non-viral liver disease, we remain committed to address in the needs of a broader population of patients. This means that we will be engaging with FDA in the coming months to define a pioneering way forward in primary stores in cholangitis or PSC, a devastating autoimmune cholestatic liver disease with no approved therapy. As with PBC and NASH before it, we expect the process of defining an appropriate regulatory path to take some time and we will provide an update on our PSC plan later this year. I want finally to highlight our announcement today of another key addition to our senior management team. I’m very pleased to welcome Ryan Sullivan, who has joined the company as General Counsel and Secretary. Ryan has held senior positions at a number of Biotech and Pharma companies including most recently as Executive Vice President, General Counsel and Secretary at Anacor, which was acquired by Pfizer. As our new GC, the line has invaluable experience and will be a great asset to our team. I will conclude by saying that we are very excited to be looking ahead to what promises to be a transformative year for Intercept. We will continue to put patients at the centre of our collective efforts and with the label update behind us and reaffirmation of those safety profiles based on experience in thousands of patients. We look forward to continuing to demonstrate the benefits of our growth and further down the road others in the pipeline can provide in the multiple indications. With that, I will turn it over to Richard for the US commercial update.

[Richard Kim:]

Thanks Mark and good morning everyone. In 2017, our first full-year on the market in the U.S., we achieved $115.8 million in Ocaliva net sales. In the fourth quarter, we achieved net sales of $32 million compared to the $32.5 million net sales from Q3 when adjusting out a one-time recognition of deferred revenue. The fourth quarter was significantly impacted by the FDAs drug safety communication or DSC that was issued on September 21st. Through Thanksgiving, we saw a significant drop in existing patient refills. As we believe that the DSC created confusion with patients on whether the warning pertaining to them. As a reminder, approximately 2% to 3% of PBC patients are estimated to be Child-Pugh B or C. We saw the patients, who were on daily dosing were modifying to weekly or twice-a-week treatment and sometimes for stocking treatment altogether. However, this trend began reversing in December and prior to Christmas; there was a sizeable increase in refill rates. In the fourth quarter, the [DLC] (Ph) focused on ensuring that position, understood the appropriate dosing of Ocaliva for the PBC patients. We believe that our asset commitment in making patients’ safety our top priority is the right and only thing to do. Interestingly and despite the DSC, market research conducted at the end of the year showed that the incredibly scores of Intercept as a partner in chronic liver disease increased substantially from 8th November. New patients start with the software after the DSC, some would see the patient feedback, some physicians express confusion regarding which patients at the DSC and at your healthcare provide letter pertained to. However from research we conducted, the majority of physicians stated that they would like to revaluate patients and/or wait for updated information regarding the safety communication to decide on the next steps for the PBT patients. We are confident that the updated label will address many of the questions that these physicians have. There has been almost two weeks since our updated label was approved and our efforts in former physicians have been very robust. Collectively, we have trained our speakers, spoken with thought leaders made call to our target position mailed an email to the updated label to almost 40,000 healthcare providers. We have also been very active in communicating with peers, educating our specialty pharmacy partners and updating the key piece efficacy [indiscernible]. Our teams have made enhancements to Interconnect, our patients services hub to further improve our vision for all patients. With respect to updated label have been positive, and most consistent feedback we have received is that it now further clarifies through the advanced products patients are and highly identify them. Other cumulative label that we have repeat feedback on, include that the box warning are very clear about the dosing issue and the type of patients that it applies to. The dosing table is an upgraded to visibly show that there are different requirements for patients with advanced cirrhosis and that adding the clinical term of a prior decompensation event along with Child-P class B or C made you here understand as these are patients with advanced cirrhosis. In our first fall of research with both current prescribers and non-prescribers of Ocaliva, 87% of physicians indicated that the updated label provided more clarity on how to prescribe Ocaliva. We see the first quarter as the key transition for our business. First we feel very confident that our label will provide clarity that physicians want and we see through our research that the underlying strong belief in the effectiveness of Ocaliva has not changed. Although our short-term priority is to notify physicians about the label update. It will take longer for us to have one-on-one conversation with majority of our target physicians. Second, we are spending to reach and coverage of our sales team to continue to our goal to educate physicians about PBC. We have added eight full time sales representative roles to bring us up to 53 and are in the process of hiring a contract sales team and help us increase our coverage of potential Ocaliva prescribers. As we believe that the fundamental opportunity of PBC remains very robust. Third, and as we see across the industry at the beginning of the year, this is a time where patients who may have changed their insurance maybe seen impact the benefits, coverage or out of pocket cost. Many patients are dealing with the deductibles resetting or exposure to the Medicare Part D coverage gap, that could impact timing of some early year refills and also negatively impact gross net. We still have a lot of work ahead of us, but our commitment and confidence in our ability to help people living with PBC has never been higher. Thank you for your attention and now I would like to turn your call over to Lisa.

[Lisa Bright:]

Thanks Richard and good morning. First, I would like to give a little more background on the regulatory activities in Europe. There will be an update to the EU label harmonizing largely with the U.S. label focused on reinforcing appropriating dosing and patients with advanced cirrhosis, which will be distributed in April once the translations have been formally approved by the EMA and individual countries regulatory authorities. Since the Autmn, we have been actively communicating the cases of miss-spacing in the U.S. as part of our ongoing educational efforts and so these label updates are unlikely to come to surprise to most physicians. In the Interim, at their healthcare provider letter outlining the main changes to the label is underway to healthcare professionals involved in caring for PBC patients in EU member state where Ocaliva is currently commercially available or whether is available through an Early Access program. We believe these activities will reinforce the importance of differential dosing and provide additional reassurance and be welcomed. So moving on to the launch itself. We're very pleased with the Ocaliva sales in the first year of launch with Q4 net sales of $5.3 million and $13.4 million for the full-year. The majority of sales as expected was in Germany and France with good initial uptake in the UK and Canada and we are encouraged to see strong underlying demand across the board. Clearly, uptake to-date has been enabled by the rapid progress we have made in pricing and reimbursement following marketing authorization in December 2016. It reflects the strong recognition of the value of Ocaliva and how it meets an important unmet need. Since our last call, we have now concluded final national pricing and reimbursement in Germany, Spain and Portugal following on from Italy, UK and Austria amongst others earlier last year. We have broad access to the private market in Canada and our attention terms to the completion of public coverage through this summer and regional access in Italy and Spain. In all countries where Ocaliva is available, we see a positive intent to prescribe over the next six months with more than 80% of current uses intending to increase their level of prescribing and almost six of the seven non-users intending to start prescribing. As we expect to see new prescribers initiating treatment over the coming months, we recently met with some of our top thought leaders to develop education initiative for PBC clinicians, which we believe will be instrumental in developing confident and support for less experienced PBC treaters across our countries. Just under three years, we have been able to establish a highly committed and professional fee across all major European countries and Canada, they have delivered what they are set out to do rapid access to Ocaliva for people with PBC and help to create networks of patients and physicians to raise the awareness and understanding of the unpredictable nature of this disease. With sales and medical teams now in place across all of our major countries, we continue to be focused on execution of our launch plan and international sales should make a meaningful contribution to our global growth in 2018. With that, I would 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 financial results for the full-year ended December 31, 2017. Before I get into the detail for the financials. I would like to provide an update on our Asian territory partnership agreement. We have required rights to develop OCA in Japan and Korea from our partner Sumitomo Dainippon via an amendment to our existing agreement. As part of the amendment, Sumitomo will retain rights in China and we have agreed to milestones and royalty payments for the development and commercialization of OCA in China. In addition Sumitomo has waived its option rights to develop our OCA in any country outside of the originally licensed territories. We see significant value in the Japanese and Korean market and intend to explore opportunities develop and commercialize OCA in these countries. Now moving on to our financials. I would like to take the opportunity to provide an update for 2017 fourth quarter and full-year results. Our cash position and provide financial guidance for 2018. Let me start off with our fourth quarter and full-year 2017 results. We recognize worldwide Ocaliva net sales $37.3 million and $129.2 million for the fourth quarter and full-year of 2017 as compared to $13.4 million and $18.2 million for the fourth quarter and full-year of 2016. This represents an increase of $111 million during 2017. Gross-to-net remain constant in Q4 relative to Q3 and was towards the lower end of our projected range of 10% to 15% for the year. Our GAAP operating expenses for the quarter were $142.7 million and non-GAAP adjusted operating expenses were $125.9 million. For the full-year, GAAP operating expense were $466.6 million and non-GAAP adjusted operating expenses were $405 million and in line with our previously issued guidance. COGS was de minims for the quarter of 2017 as the costs related to manufacturing was expensed prior to FDA approval of Ocaliva. The Company expects cost of goods to remain negligible until previously expensed supplies for OCA [indiscernible]. We also recognized $7.4 million and $29.3 million of interest expense for our outstanding convertible notes for the quarter and year-end 2017. So moving on to our cash position, we ended the year with $414.9 million of cash equivalents, investible securities on our balance sheet. This represents a reduction of cash of approximately $274.5 million during the year as compared to 2016. And finally, we are announcing our guidance for 2018. Given the proximity to our Ocaliva label update, we are not providing sales guidance at this time, but hope to be in a position to update you next quarter. That said, I would like to remind you at the industry wide expected softness in the first quarter performance in the U.S. as insurance plans reset. Given just the fact, we expect modest sequential growth in the first quarter of 2018. We continue to expect growth in that for the year to be in the 10% to 15 % range. Flat quarter communicated that we were embarking on our efforts to reduce our operating expense growth by streamlining our operations and repriortizing programs to focus our resources on the ongoing commercialization of Ocaliva and the advancement of our clinical development program of OCA and NASH. For the year 2018, we expect non-GAAP adjusted operating expense to be in the range of $390 million to $410 million. For the full-year, we expect interest expense of approximately $30 million, which includes the amortization component for obtaining comparable notes. Finally, as a reminder, adjusted operating expense is a non-GAAP financial measure. We anticipate stock-based compensation expense will represent the most significant non-cash item that 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 would like to turn it over to the operator for any questions. Operator?

[Operator:]

[Operator Instructions]. Our first question comes from the line of Alethia Young with Credit Suisse. Your line is now open.

[Alethia Young:]

Hey guys. Thanks for taking my questions. Just one, can you talk a little bit about the frequency of like how often doctors monitor patients at the moment and kind of what’s involved with that and then just generally maybe talk a little bit more about. Are there physicians looking to monitor kind of all of their patients or is it just a sub-group that we have kind of look into with the label update and have you kind of updated what you think that percentage is of patients kind of involved in the label update as well. Thanks?

[Richard Kim:]

Sure. Hey, Alethia, it’s Richard Kim. As far as monitoring is concerned, a couple of weeks ago, we had a chance to hear from Dr. John Vierling from Baylor University. I’m not a physician, but I think the way we describe it is, patients are generally monitored, usually followed up every three to six months and as RSV elements as far as monitoring there and what’s in our label, we basically heard as very consistent with its standard of care for how to access an ongoing PBC patient whether they’re on UDCA or on Ocaliva as well. And when you think about the patients that I guess I think your question is maybe more of these advanced competitive patient pertains to. Right now, we see about approximately 4% of our patients, who are actually sort of in that category. It compares a little bit, right now the aspirin is about 2% to 3% percent of patients from NASH perspective are Child-Pugh Class B or C. So that number has the 4% has been coming down over time, it started to be close to 8% when we launched and I said it is now pushed at about 4% currently today.

[Alethia Young:]

Okay, thanks.

[Operator:]

Our next question comes from the Michael Yee with Jefferies. Your line is now open.

[Michael Yee:]

Hey, good morning guys. Thanks. Two questions, one on commercial. I guess Richard; I just wanted to confirm you expect Q1 to grow over Q4. I guess what gives you that confidence given it's a pre-volatile quarter, how confident are you in that happening and what impact does the new contract sales force add to anything. Maybe talk a little bit about that for Q1 and perhaps even Q2. And then on the clinical side on the reverse study, which you just announced, can you talk a little bit about perhaps your powering, what that was based on. I know you have some patients in the FLINT study; I think that might have even qualified for this study. So maybe talk about how you designed the study and your thoughts around the conviction in that particularly with the one year endpoint.

[Richard Kim:]

Hey Michael. Yes, thanks. So as far as Q has concerned, I would consider Q1 to be as I said earlier a quarter of transition for us. What would be overall across all of our marketplaces is a very modest growth, which was what we saw in Q4 2018. This is a quarter where we are making a top priority to make sure we communicate the updates in the label, so that's really our priority now, but I think once we get that foundation we really see physicians having a clarity to know how to prescribe Ocaliva in these advanced patients and to answer your question on the CSOs. Basically, our intention here is to really just increase our reach of physicians. In the past, we harbored approximately a little over 4000 target physicians with the addition of our TBMs, that’s going up to 53, our territory business managers will be up about 50 to 100 physicians that we cover with the CSOs, we will be baked in about another 8000 physicians and we used them to hub identify a new potential treatments in the future as well. And I can turn the next question over to Mark.

[Mark Pruzanski:]

Yes, Mike. So with respect to reverse as I mentioned in my prepared remarks, we continue to have the confidence based on the robust results in the FLINT on both fibrosis reversal and on NASH resolution to probable endpoints that are out there. What we did was we took a look at the patients with advanced fibrosis specifically the F3s in influence to base our powering assumptions on for these early compensated cirrhotics. And again, that's the basis for which we're confident that we will in fact be able to reverse disease scores in a significant number of patients with early compensated cirrhosis.

[Michael Yee:]

And remind me if I hadn’t go back to the slides in F3s what percent was that how many patients and what's the effect basically the same as the rest of the population.

[Mark Pruzanski:]

So, about a third of the patients enrolled in FLINT and randomized to OCA 25 mgs, had F3 fibrosis. And I don't have the numbers right in front of me right now. But we actually had the most robust improvement in fibrosis in that cohort of the patients.

[Michael Yee:]

Okay. Thanks.

[Operator:]

Our next question comes from the line of Ian Somaiya with BMO Capital. Your line is now open.

[Ian Somaiya:]

Thank you and thanks for taking my questions. First question Richard, if you could just share with us the type of feedback you're getting from the physician community. I know you mentioned that persistency and the compliance are an issue during the FDA communications are you are negotiated a new label. Curious of what impact that had on the type of patients that are coming on to therapy and what's your start to see post to label update?

[Richard Kim:]

Ian sure no problem. So first as far as the feedback is concerned. Like I said in my prepared remarks, generally, I think people find better labels providing a lot more clarity and really identifying who and how to monitor the advanced cirrhotic patient. So the impact is really good. I think people really appreciate the fact that this really removes a lot of uncertainty that the Drug Safety Communication had previously. As far as participation finance. Once again, we actually saw a much bigger rate of brought out from the persistency post to the FDA. As I stated earlier, we saw that rebound quite a bit in December and so we feel like we are back in sort of the normal trend as far as that’s concerned. As far as peaks are concerned, we saw a little bit of impact across all patient group to new patient start at the end of last year, because the biggest question some physicians had was who the DFC really related to. But we only been a couple of weeks since labels and updated. But I think people are sort of getting into their sort of normal motive as far as being able to think about where the prescribers of Ocaliva. So I think with time with the labels being out there, we will see physicians get back to what I would say a slightly more normal state in how to think about their PBC patient.

[Ian Somaiya:]

Okay. And just on development whether it’s in PBC or NASH. We are seeing a certain level of movement toward combination therapies. I know you clearly focus on the trial that you are conducing and on the commercial launch. But just speak to your willingness to participate in whether it be investigator sponsor studies or enter into data sharing collaborations with other developers in this space. Just anything in that regard, which might speak to a combination opportunity in the future?

[Mark Pruzanski:]

Yes Ian. So you are right and yes, we are willing, we have been saying for quite some time that we have got our eye on everything that is out there in the space both on the NASH and PBC side. At the same time, at least on the NASH side, it’s been clear and that the bar it is exceedingly high to demonstrate that kind of efficacy on histology that is required to gain approval and to have suggest the marketplace. As I mentioned in my remarks, frankly, if you look at this past year’s news flow, there have been a number of frankly disappointment that have recalibrated at least from our view on where things are on the space, it’s still early days in the NASH space. And finally I keep coming back to the fact that we believe, we had simply the most robust Safety and Efficacy data supporting positioning OCA as first-line therapy and backbone therapy in this disease. And yes, overtime, I’m sure that there will be drugs with other mechanisms of action that can be profitability added to and certain segments of the population and yes, we are committed to exploring that for the right mechanism.

[Ian Somaiya:]

Thank you.

[Operator:]

Our next question comes from the line of Navin Jacob with Deutsche Bank. Your line is now open.

[Navin Jacob:]

Just a quick question for Sandip. Was there any inventory build or burn in Q4 on Ocaliva? That’s question one.

[Sandip Kapadia:]

No. Our general inventory, I assume you are talking about trade inventory. And typically, our inventory has been rather stable throughout the period. I mean typically, you will see a little bit of it increase for the holidays as patients, but nothing that I think noteworthy to mention that impacted list of the sales, but typically there is a little bit of an increase for the holidays because people go up as well.

[Navin Jacob:]

And then a couple for Mark P please. Just on the REVERSE study, wondering what kind of PKPD modeling you have done that gives you confidence at 10 milligram and 25 milligram are the right doses in cirrhotic patients in NASH.

[Mark Pruzanski:]

Yes, thanks Navin for the question. So you know we felt that it was important to test the same dose range that we are testing in REGENERATE just as is the case on the PBC side in patients up to and including compensated cirrhotics. We currently don’t anticipate dose modification in the sort of equivalent population on the NASH side or frankly any other liberal related indication. We have completed PKPD work that frankly informed our choice of dosing in these patients and you know I do think that it’s important for us to take a look at - we know that the 25 is the dose that worked in FLINT. It was the only dose that was tested FLINT, but we have reason to believe that 10 could also be active. So we will know for SAP-19 when we turn the card over on the REGENERATE interim analysis, we felt it was important to test the same doses in compensated cirrhotic.

[Navin Jacob:]

Yes, I guess the reason why I’m asking is because obviously architecture of delivery is different, you know the greater the fibrosis is and so just for any concerns out there that anyone of those concerns out there with regards to potential for drug accumulation that further down the fibrosis scale you go further up the subscriber scale you go. Why wouldn’t you think about going down to about like a 5 milligram for example?

[Mark Pruzanski:]

Again I think it’s very important to remember the REVERSE trial is studying patients with early compensated cirrhosis, we none the less represented the majority of the unmet need in this cirrhotic population and frankly the most risk progressing to liver failure and premature death. And you saw highlighted in the press release some stats just highlighting how seriously progressive the disease is once you have cirrhosis. But that said, it’s very important to remember that our drug is modified Bile Acid and it circulates with the Bile Pool and what’s important to think about is exposure levels in the lever. And frankly in patients with compensated cirrhosis, there is only a marginal increase in hepatic exposure of the drug dose for those. So that’s based upon which we felt just as is the case, there is no dose modification in PBC patients with compensated cirrhosis, we don’t anticipate the need for dose modification in NASH business with compensated cirrhosis.

[Navin Jacob:]

And then final question, when can we start to see an inflection happening in scripts to see a return to the type of trajectory you had prior to this safety warning.

[Mark Pruzanski:]

Richard?

[Richard Kim:]

Yes, it’s a great question. I think you know as I mentioned previously, I think quarter one will be a transitioning quarter for us as we get the message out there. I think once we get the updated label communicated and as I mentioned earlier maybe the business can get active having greater credit effect and where to prescribe what caliber. I think after that we should feel confident about our ability to get back to growth. But I think it will take some time for us to do that. We have made a priority over the notified people about the label, but we have to want have to those one-on-one conversations that people that truly understand the impact of the update as well.

[Navin Jacob:]

So, does that mean like the second half type of timeframe, second half 2018?

[Mark Pruzanski:]

Yes, I mean we don't really provide specific guidance, but I would say once we get passed informed and actually having with one-on-one conversations on our updated label. I think we said feel more confident about our ability to get back to growth.

[Navin Jacob:]

Thank you for taking my questions.

[Operator:]

Our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open.

[Salveen Richter:]

Thanks for taking my questions. Just in regards to your comments about drops in patient refills. Can you just give us some clarity on the [indiscernible (0

[Richard Kim:]

Yes. I'll take the first part of the question as far as the refills are concerned. So what I would say is what we saw in the marketplace with people would be certain who is drug safety communications pertained to. So one of the issues that we saw were [indiscernible] so what we saw in general was people who were on daily dosing, we're going to actually have something less than that, either weekly, twice-a-week and sometimes starting for clear time. As I did mention, we saw repo rates increased quite significantly in December as part of the holiday rate. So I what we have also heard is physicians have been into market research that one period of clarity around the communication. They planned the majority of the plans to evaluate their patients currently as well. I think Mark, do you want take the second part of the question?

[Mark Pruzanski:]

Yes. So I mean, I think on the BD front, it says we have been saying, we're certainly addedly looking at everything that's out there on dose frankly, the NASH and the PBC side. But I think that just has been the case with OCA, we remain fundamentally data driven. And as I mentioned a few minutes ago on the NASH side, the bar is very, very high. And you need to demonstrate histologic, it's a biopsy based meaningful improvement in this histologic parameters that actually are approvable and meaningful clinically and commercially. So that bar is high, there is managing a few compounds that have met it. Frankly none were really aware of on outside of OCA in a robust well-controlled study. And so we will keep looking and you should expect to see us engage in pipeline building activities as we focused on growing the business going forward.

[Salveen Richter:]

Helpful. Thank you.

[Operator:]

Our next question comes from the line of Ritu Baral with Cowen. Your line is now open.

[Ritu Baral:]

Good morning. Thanks for taking the question guys. First question is on REVERSE. Now can you take as to why the primary endpoint of REVERSE?

[Richard Kim:]

So it differs from… Hello Ritu? We lost Ritu.

[Mark Pruzanski:]

Operator, it seems we have lost Ritu. We will see if she re-queues, can we go into the next question?

[Operator:]

Our next question comes from the line of Jim Birchenough with Wells Fargo. Your line is now open.

[Jim Birchenough:]

Yes. Hi guys. Thanks for taking the question. So I just wanted to clarify on the powering for REVERSE. Mark, you mentioned a 90% power, but 90% power is the fact what changed over what baseline assumption for the control group. And then if you could remind us what the Powering at that level is for the REGENERATE study. And I’ve got a follow-up.

[Mark Pruzanski:]

Yes. So Jim for REGENERATE, we are also over 90% powered on both on our endpoints there. I’m not going to get into the assumptions, specific assumptions behind it. But we speak to our – we are confident in the assumptions that we made, led to patient selection and sample size in REVERSE.

[Jim Birchenough:]

And then maybe just commercially for Richard. Could you talk about the decision to initiate treatment with Ocaliva and maybe, the distribution that’s out there between physicians that started two times upper limit normal or three times upper limit normal or who need progressive increases in our thoughts and how that’s changing overtime, just straight to us, there’s a bit of a distribution out there and maybe you could speak to that and how you might have physicians treating earlier?

[Richard Kim:]

Jim, it’s great question. So obviously, our labels continued to patients - and as we have explained before, people define that different physicians to kind of differently. As I said it earlier, we saw as with a lot of new product launches whether it’s huge unmet need, there is higher uptake in patients with more advanced disease and I think as we have progressed, we are seeing patients with lower levels or less advanced disease that are coming more to mix. So, there has been a lot of interesting data out [indiscernible] and other sources that talk about the impact of the recent levels for example. So, we see a natural progression around the definition in order to respond sort of evolving as needed emergence in marketplace as well.

[Jim Birchenough:]

And then maybe just one final question if you could allow me. For PSC, I’m just interested in discussions around the regulatory strategy there and how much of that’s focused on natural history. What is, how well-developed is the natural history data and PSC in terms of looking at surrogates like alk phos and predicting outcomes and do you envision having to do a super group type study in PSC? Thanks.

[Mark Pruzanski:]

Yes. Jim, it’s an important question. As I mentioned in my remarks, the pathway remains undefined. I can tell you FDA hosted as you know some year and a half ago or longer a PSC endpoints workshop with multiple stakeholders and are very keen to work with us to define a pathway forward. Alk phos, the recent literature is supporting its clinical relevance and what we said before is that we believe it’s necessary, but likely insufficient to support and accelerated approval in PSC. There are several other potential endpoints, which are relevant, clinically relevant in the disease course that could be considered in sort of adding to in a composite manner to alk phos. And again, it’s pretty mature for me expect right now, what exactly the endpoint could look like. But I should say that, we are looking at this, FDA is looking at this. And it’s going to take some time, but we are committed to defining the path forward.

[Operator:]

Our next question comes from the line of Brian Skorney with Robert Baird. Your line is now open.

[Brian Skorney:]

Hey, good morning, guys. Thanks for taking my questions. Two from me. I guess, just get some more details on the thoughts around the doses in the REVERSE study. I just wanted to get an understanding for the thoughts about why specifically, the titration stopped to the 25 mg dose as opposed to just straight 25 mg dose in the NASH study. And just on the update with the Sumitomo, Japan rights coming back to you. Just your thoughts on what you are planning to do in Japan. Is there some time when you’d explore further development in NASH on your own or is it this really something they are just looking to cut to partner? Thanks.

[Richard Kim:]

Yes, thanks I will take the first one and then hand to Sandeep. I think with respect to the decision to titrate 10 to 25, it’s a strategy that’s served us very, very well on the PBC side if you remember in our Phase III program there in place we demonstrated that titrating from five to 10 overtime significantly ameliorated tolerability specifically the [indiscernible] that we see in dose dependent way with our CA, but with no sacrifice overtime in efficacy. And you know the same principle we hope will prove to be true here. As I also mentioned in response to another question a few minutes ago, you know we do have some PKPD data there that informed our selection of doses in this range. And we have good reason to want to test the 10 as well as the 25 which of course is the dose that worked in FLINT so well.

[Sandip Kapadia:]

And then I will take the second one, Brian thanks for the question. What I can say is you know we are really excited about requiring Japan rights. As you know Japan is a major pharmaceutical and we see great potential for OCA there and we are looking at all various different options in terms of how best to gain value there.

[Operator:]

Our next question comes from the line of Joel Beatty with Citi. Your line is now open.

[Joel Beatty:]

Hi good morning and thanks for taking the question. The first question is on dosing and the REVERSE trial. As I mentioned earlier these are compensated cirrhosis patients and dosing is in-line with compensation cirrhosis patients with PBC. My question is for patients in the trial advanced to decompensated cirrhosis. Would you plan to use a similar dosing as is recommended for those heads of patients in PBC and then I have a follow-up question.

[Mark Pruzanski:]

Yes, it’s a great question and look just to remind you this study is a, it’s a one year double-blind phase in compensated cirrhosis. It is possible that a patient over that time course could advance but probably unlikely to decompensation and that said just as is true and in such shop study there are safety tracks in place on to catch patients who do advance and appropriate steps taken with respect to investigational product that the application is taking?

[Joel Beatty:]

Okay, thanks and one last question related to the survey results that you showed and how physicians feel about the clarity with the label update. Did you notice any difference between current prescribers and then non-prescribers or OCI. Thanks.

[Richard Kim:]

There was a bit of a difference but there wasn’t much of one, so the response rates were little higher with people with experience who have already prescribed Ocaliva, but I think what I was pleased to see was it wasn’t that much lower folks who have not prescribed it as well.

[Joel Beatty:]

Okay, great. Thank you.

[Operator:]

Our next question comes from the line of Jay Olson with Oppenheimer. Your line is now open.

[Jay Olson:]

Hey guys thanks for taking my question. I had a question about the potential to develop OCA for alcoholic hepatitis, I notice did some work for example the Phase II TREAT study in moderately severe alcoholic hepatitis and you have a second study looking at the effective alcohol consumption on FXR signaling. Is this an area where you plan to pursue development of OCA or is that no longer an option.

[Mark Pruzanski:]

Look, it's a high unmet need, it's a tough population to do studies in. Actually our first experience in alcoholic cirrhotics including Child-P B and C decompensated patients with several years ago and the so called PESTO study where we demonstrated a proof-of-concept with OCA at 10 and 25 milligram doses over a relatively short period of 10 to 14 days on hepatic venous pressure gradient portal hypertension. And you mentioned TREAT and there is another study which is frankly an IST Investigator Initiated study. We're currently while acknowledging that there is clearly an unmet need there that's the way that we intend to pursue research for the time being in that population.

[Jay Olson:]

Okay, thank you. And then just one follow-up on the progress of Ocaliva commercialization in Europe. Thank you for the update there in the prepared remarks. I didn't hear mentioned of Italy or the Nordic countries. And I was wondering if there is any color you can share about reimbursement there?

[Mark Pruzanski:]

Lisa.

[Lisa Bright:]

Yes thanks for the question. So as we know we have made pretty good progress across Europe in terms of pricing reimbursement in Italy. Specifically we have continue to national pricing in reimbursement. As you know that usually takes a little bit longer. So we're in a good place from the national perspective but across the real opportunity is now to negotiate on a region-by-region basis. So our teams are heavily involved in doing that right now. And so far, we have got...

[Mark Vignola:]

Lisa we have lost link. Yes look we have lost Lisa. Jay we can follow-up.

[Jay Olson:]

Okay, great thank you.

[Operator:]

Our next question comes from the line of Andrew Berens with Morgan Stanley. Your line is now open.

[Andrew Berens:]

Hi thanks for taking the questions happy Valentine's Day guys. Maybe one more PKPD question and then a financial question. I guess and this is in response of couple of things you said Mark during the call. And then also that model that you guys put into the review process. The concentration of Ocaliva, does it go up in the liver in patients that are decompensated cirrhotic. And I'm talking about the concentration of the drug in liver how systemically?

[Mark Pruzanski:]

Yes it's predicted to go up in decompensated patients. And that's actually the basis for the recommendation in the Ocaliva label and the PBC side to modify dosing in Child-Pugh Class B and C patients in decompensated cirrhotics there. And as I mentioned in my remarks, we do intend to follow-up the REVERSE study and design a clinical outcomes confirmatory trial, which will include an overlapping, but also more advanced population of patients. And it's possible and this is the case for many drugs and [indiscernible] liver to possible that all enough that modified dosing in more advanced NASH patients similar to the PBC side.

[Andrew Berens:]

Okay. So I mean that sounds like a change from the review process where I think you guys and the FDA felt like the reason to do dose changing was the systemic effect like the - rather than the concentration in the liver. At least that was now read on the discussion, it’s in the reviewed documents. Has there been change there?

[Mark Pruzanski:]

No, I don’t have the reviewed documents in front of me. But I think that issue that’s introduced in the label frankly is the fact that the predicted exposure in the liver dose-per-dose in a decompensated patient is going to go up. Systemic levels, plasma levels of any bile acid do not reflect hepatic levels of bile acids.

[Andrew Berens:]

Okay. I will follow-up with you guys offline today.

[Mark Pruzanski:]

Yes. Happy to.

[Andrew Berens:]

And then just a question on the expense guidance. Does that include, my understanding is that there will be another confirmatory trial in addition to REVERSE? And when would you start that trial? Would it be a large as the COBALT trial potentially or even the confirmatory part of NASH? And is that part of your 2018 expense guidance currently that trial?

[Richard Kim:]

I mean, I would take care. In terms of the guidance, I mean, we are very much focused on the guidance does obviously include the REVERSE trial and the expenses related to that as well as our ongoing development programs in NASH, as well as of course, the commercialization of PBC. The confirmatory trial would be something that note beyond 2018 and so not really included as part of the guidance for this year.

[Mark Pruzanski:]

And just a couple of additional points of color here, Andy. We have to design the study and as you well know under some part of regulations to accelerate to the approval pathway, study of confirmatory trial should be underway prior to marketing approval. And then reach out on the post marketing basis very similar to COBALT, our phase for PBC study. Can you speculate on how big it’s going to be at this point? But it’s going to be down the road. And frankly, it will also be de-risked in the sense that will at that point have data on histology in the population.

[Andrew Berens:]

Okay. And then just the last question. Can you give us some color on SDP’s decision to not go forward in Japan and with the program an outside of China?

[Richard Kim:]

Yes. We really or what I would say, we can’t really speculate on those sort of the evolving business goals of the year. But as I said, I mean we are very excited about requiring the rights. We see a lot of potential for OCA there in Japan. And we are certainly committed to moving forward and ensuring that at some point.

[Andrew Berens:]

Okay. Thank you. That was interesting.

[Operator:]

Our next question comes from the line of Ritu Baral with Cowen. Your line is now open.

[Ritu Baral:]

Hi guys. Sorry about earlier. One question on REVERSE and another question on the contract sales team. Why the difference in the primary endpoint for REVERSE versus REGENERATE? Are these patients already at risk for sort of the NASH [indiscernible 15* (3

[Mark Pruzanski:]

Yes. So Ritu, the reason quite simply as exactly as you just mentioned that not all. Once you progressed the cirrhosis you often see burnout, I would state hepatitis. And so while this is a study in NASH patients with compensated cirrhosis. The thing to focus on in this population is reversal of fibrosis first and foremost. And just to be clear, that endpoint which is one stage improvement, so in this case going from that four to at least have three with no worsening of NASH is identical to one of the two endpoints in REGENERATE.

[Ritu Baral:]

I was monitoring in safety requirements as part of the protocol right now?

[Mark Pruzanski:]

Just standard, it’s a standard study design that we have. We don’t get into – we have a lot of studies ongoing, so we don’t get into details of visit frequency from study-to-study, but nothing on to work.

[Ritu Baral:]

Nothing will materially be different that REGENERATE. Is it fair to say?

[Mark Pruzanski:]

Yes.

[Ritu Baral:]

Okay. And then the contract sales force, can you go over the expected size and cost, do you expect there is to be a permanent part of your sales effort and any more detail on who exactly the doctors they’re targeting. Is it community? Is it the different part of the office et cetera?

[Sandip Kapadia:]

Hey. Thanks, Ritu. I always think about PBC as a large rare disease and there is a lot of patients out there and physicians who mentioned that we still have to reach. So as far as the sales is concerned, we are still working to the final numbers and costs. But what I would say is, as you only know if there is somewhere between 12,000 and 15,000 gastroenterologists, we cover off around 4,000 to 5,000 of them. So we believe there is ability to actually expand our reach and get to more physicians, who may have a few patients during there as opposed to the larger centers as well. We also do know that there are through prescription claims and lab data that there are many PBC patients within primary care offices and other specialties as well. So our intention is to make sure we understand where more of these patients are and provide the right for those physicians going forward?

[Ritu Baral:]

And do you expect it to be permanent; this forced to be permanent at this point?

[Sandip Kapadia:]

My mom has told me nothing in life is permanent, but what I would say is this is a very important pillar for what we are doing and I think we are going to learn a lot and we will be really happy to share our insight that we’d learn over the coming quarters as well. So, I think we want to first get out there and see what’s going on and we have a lot of good data that we want to validate and we will see where this goes.

[Ritu Baral:]

Got it. Thanks for taking the questions.

[Sandip Kapadia:]

Thank you.

[Operator:]

And that concludes today’s question-and-answer session. I would like to turn the call back to Mr. Mark Pruzanski for any closing remarks.

[Mark Pruzanski:]

Thanks, operator and thanks everyone for listening in and contributing today. As I mentioned earlier, 2018 will prove to be a pivotal year for Intercept and on behalf of everyone in the company we are super-excited to continue to focus on PBC, NASH and PSC patients up and others with progressive non-viral liver diseases. We will deliver this year on a return to growth in the PBC opportunity. Reinforce our leadership position in NASH and our ongoing Phase III program through REGENERATE and REVERSE of anchors and intend to clarify a path forward in PSC. We will maintain our commitment without any wavering to the patients inspire the work we do at the company every day. Thanks very much and we will see you next time.

[Operator:]

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