Intercept Pharmaceuticals, Inc.
Q1 2016 Earnings Call Transcript

Published: 6 May 2016

[Operator:]

Thank you for joining Intercept Pharmaceuticals 2016 First Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. Following the formal report, 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 website for two weeks from today's date. At this time, I would like to introduce Dr. Mark Vignola, Intercept's Director of Investor Relations. Please go ahead.

[Mark Vignola:]

Good evening, everyone, and thank you for joining us on today's call. We're reporting financial results for the quarter ended March 31, 2016. 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 the potential approval and commercial launch of obeticholic acid, 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 expectation 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 the Risk Factors sections 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. The format for today's call will include opening remarks from Intercept's management team and then we'll open the lines to take your questions. I would like to note that we have slides accompanying today's call and webcast which are available on the Events section of our IR website or can be streamed along with our webcast. At this time, it's my pleasure to turn the call over to our CEO, Dr. Mark Pruzanski.

[Mark E. Pruzanski:]

Thank you, Mark, and thanks to everyone for joining us on our conference call and webcast. I'm going to provide you with a 2016 corporate update. Lisa Bright, our Chief Commercial and Corporate Affairs Officer, will make a few comments on our ongoing commercial preparations. Barbara Duncan, our Chief Financial Officer, will then discuss our financial results and cash position. Also available to answer questions on this call are Rachel McMinn, our Chief Business and Strategy Officer; and Richard Kim, Senior Vice President and Head of U.S. Commercial. Before I begin, I would like to remind you all again that we have slides accompanying today's call, as Mark just mentioned. These are being streamed along with our webcast or can be accessed through the IR section of our website. Given our ongoing negotiations with regulatory authorities, we will not be discussing our regulatory interactions or respond to questions on this topic. 2016 is a momentous year for Intercept as we transitioned to a commercial stage biopharmaceutical company. Key highlights year-to-date include

[Lisa Bright:]

Thanks, Mark, and good afternoon, everyone. As we move towards our May 29 PDUFA date, there is a possible level of excitement in our U.S commercial team to launch Ocaliva, which, if approved, would be the first new medicine for patients with PBC in 20 years. I'd really like to thank our 45 territory business managers, our managed markets team and the broader commercial team who've been working together to develop an aligned cross functional plan, as highlighted on slide 13. Our focus is really in four key areas. But firstly, we have to communicate the unmet need in PBC. A key cornerstone of our strategy for the foreseeable future will be to continue disease education programs to help physicians understand findings from large PBC datasets, both the Global PBC and the UK PBC, and the importance of tracking alk phos in this disease. These large datasets have shown that attaining lower alk phos levels is correlated with lower risk of liver related complications, including transplantation or death. For example, we've executed actually now 100 programs focused on raising general awareness of the PBC disease state and current treatment approaches. This initiative has reached approximately 1,000 physicians. And we're proud to have been part of increasing the awareness in the healthcare community of this important orphan disease. We must prioritize our sales efforts for high volume prescribers. And, cumulatively, we profiled over 4,000 of our core potential customers which has helped us to continue to refine our knowledge of how PBC patients are treated, how many PBC patients there are and where they are located in the U.S. It's essential we achieve broad payor coverage and our managed market team has performed extensive payor research with national and regional payors to enhance our understanding of how they will cover and reimburse for PBC patients. We completed three National Advisory Boards, two national mock P&T simulations and have had over 50 interactions with key regional and national payors as broad recognition and intent to cover patients within the POISE population. Finally, we have to enable patients and physicians to have a great experience with Ocaliva. Good examples of some of our initiatives include websites and the mobile app to help patients monitor their own alk phos as well as what we expect to be a best-in-class patient services program to help guide the transition onto treatment. With less than a month to an anticipated approval, we are ready to launch in the U.S. We're ready post-approval to communicate the tremendous scientific innovation that Ocaliva represents. In Europe, we continue to plan for a late 2016 approval and continue to anticipate our first sales in 2017 on a country-by-country basis. We're making great progress across multiple funds outside the U.S. We've worked to make sure we have robust plans ready for launch in multiple markets. And we're devoting extra focus and resource on ensuring successful market entry in key early launch markets, particularly France, Germany, the UK and Canada. And, of course, we continue to work closely with the relevant health technology assessment bodies. I'd now like to hand over to Barbara Duncan, our Chief Financial Officer, to talk through the financials.

[Barbara Gayle Duncan:]

Thank you, Lisa, and good afternoon, everyone. Please refer to our press release issued earlier today for our summary of our financial results for the quarter ended March 31, 2016. We ended the quarter with $556.9 million of cash, cash equivalents and investment securities available for sale on our balance sheet. Our detailed financial results are contained in our press release issued earlier today. Our first quarter 2016 non-GAAP adjusted operating expense was approximately $71.9 million. This amount excludes the one-time $45 million net settlement of the purported securities class action lawsuit, non-cash stock compensation expense of $10.2 million and depreciation expense of $684,000. In regards to the settlement for the purported securities class action, this is a one-time expense recognized in our GAAP G&A expense for the first quarter of 2016. We anticipate this payment will be made in the second quarter of 2016. The increase in our expenses in the first quarter of 2016 versus the first quarter of 2015 was the result of infrastructure build out supporting our general corporate activity, our pre-commercialization activities in the U.S. and internationally and expansion of our research and development efforts. For the full year 2016, we reiterated our adjusted operating expense guidance in the range of $360 million to $400 million. Now, this excludes the $45 million net settlement for the purported securities class action lawsuit, stock-based compensation and other non-cash items. These expenses will support the pre-commercialization activities of our U.S. and international teams and commercialization expenses anticipated post-approvals. They will in addition support a growing clinical program that includes the broadening NASH program, including the REGENERATE and CONTROL trials; continuation of the PBC outcomes and long-term safety extension trials; Phase 2 trials in PSC and biliary atresia; as well as our Phase 1 program for our next clinical candidate, INT-767. As a reminder, we expect operating expenses for the year to be weighted in the second half, driven by increased R&D activities, as well as our anticipated U.S. Ocaliva launch expenses. While we are not providing any sales guidance at this time, we would like to reiterate. Given our May 29 PDUFA date, we do not expect material sales in the second quarter. It will likely take several weeks from first prescription to written to reimbursement and sales prescriptions. Ex-U.S., we do not expect sales until 2017 and these will be on a country-by-country basis as we attain pricing and reimbursements. Adjusted operating expense is a non-GAAP financial measure. We anticipate that other than the net $45 million charge for the purported share litigation, stock-based compensation expense will represent the most significant non-cash item that is excluded in adjusted operating expenses as compared to operating expenses under GAAP. Please see our press release from today for reconciliation of our historical non-GAAP adjusted operating expense to GAAP operating expense. With that, I'll turn it back to the operator for questions.

[Operator:]

Our first question comes from Michael Yee of RBC Capital Markets. Your line is open.

[Michael Yee:]

Hey, guys. Thanks. Two questions, one is on the enrollment of REGENERATE. That was new information today, so I think we all appreciate that guidance. Can you talk to what it assumes? What are the push poles in that guidance? How would the timing of the enrollment be impacted by what things? And is that assume competitive drugs out there that are enrolling? Maybe you could talk to that a little bit. And then the second part of the question is, in terms of the competitive environment out there, obviously, fibrates i.e., PPARs were just pulled from the cardiovascular market. Do you think that impacts the perception of the class and the profile of those drugs? Maybe you could talk a little bit about that and the competitive landscape that's playing out there. Thanks.

[Mark E. Pruzanski:]

Sure, Mike. I'll take the first question and ask Rachel to take the second one on fibrates. So with respect to REGENERATE, yeah, we felt that we're in a position now to provide guidance for completion of enrollment in the first half of 2017. As you know, this is a huge trial, first Phase 3 NASH trial of its kind. And we're looking to enroll to support the interim analysis, 1,400 NASH patients with stage 2 or stage 3 fibrosis and then another 600 for 2000 in all to follow through to outcomes to confirm clinical benefits, so really a pretty huge study. Earlier this year, we weren't prepared to provide guidance just because we didn't have the visibility on trajectory given the relatively long lead in period for screening and the ramp-up in operationalizing the study with target of up to 300 centers worldwide. So I would say just in terms of the dynamics, we factored everything that feeds into the rate of enrollment, including competitive dynamics out there. There is right now one other Phase 3 that's being mounted and a number of Phase 2 studies from various companies. And, obviously, all these compete for patients. Now that said, we believe that we really have a uniquely differentiated opportunity for investigators and the patients they care for to enroll in the REGENERATE trial, based on the unprecedented data from the FLINT study showing uniquely the ability of OCA to not just stop it, but in a significant proportion of patients actually reverse fibrosis which, as you know, is the single most important histopathologic feature driving adverse clinical outcomes. So we feel we've got good positioning and feel – are happy to provide guidance today. And I'll let Rachel answer on fibrates.

[Rachel L. McMinn:]

Yeah. So, Mike, thanks for the question. So you're right to point that out. It's just recently the FDA took the unusual step of withdrawing the indication for fenofibrate on top of statins and the cardiovascular certainly to treat high cholesterol. But the underlying claim obviously is about cardiovascular benefit. And as you probably are aware, there is – data has been out for some time now that when you add a fibrate on top of the statin that there is no improvement in cardiovascular outcomes. There's been a whole bunch of other datasets that I have added to this and have led to not just fenofibrate but other drugs being pulled as well, niacin specifically. I think the main perception issue that we think this is going to impact is really those competitors going with a fibrate-based mechanism. As you know, fibrates act against PPAR alpha or alpha/delta or alpha/delta gamma depending on which specific module you're talking about. Some companies have made bold claims as they are cardio protective, but certainly the FDA's action would suggest otherwise.

[Michael Yee:]

Okay, very helpful. So it definitely adds to a lot of uncertainty there. I appreciate it.

[Rachel L. McMinn:]

Sure. Next question, please.

[Operator:]

Our next question comes from Alethia Young of Credit Suisse. Your line is open. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Hey, guys. Thanks for taking my question and congrats on the positive panel. A couple things. One, in the case of the enrollment, is there a limitation on how many patients can be enrolled at certain sites? And then I have another question.

[Mark E. Pruzanski:]

No, there is no such limitation on patients at sites. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Okay. And then as far as like PBC, maybe can you talk a little bit, for Lisa probably, about the EU and U.S. market and how to think about that in particular. Is there any kind of information you can provide us on like compliance or persistence, how to think about that in our models?

[Rachel L. McMinn:]

We will turn the U.S. question to Richard Kim, who can answer that. And then Lisa can come back and answer if there's any specific differences in that.

[Richard Kim:]

Yeah. Hi there. It's Richard Kim. So, yeah, I learned quite a bit about the marketplace here in the U.S. from prevalence all the way to our number of patients we think are eligible for POISE. As far as your specific compliance questions are concerned, when we actually look at what UDCA has done historically, it's in the range of about 35% compliance. So we use that as a good parameter as we're learning through things. So we've used a lot of historical data from UDCA and other chronic care medicines as well. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) And in the case of thinking about persistence like potential discontinuations you guys have like – what do you think about that?

[Richard Kim:]

Very similar. As we look to UDCA, the persistence is not – a little bit below that 35% mark, probably a little close to 34%. And, once again, as you think about the patients that POISE actually studied were all exposed to PBC, to UDCA. So we've used that to gain a lot of our insights.

[Lisa Bright:]

Yeah. I mean, in essence I mean these issues are going to be – the segment is – I think it's interesting that these patients who've been on UDCA, you know that persistency rates. We anticipate that we're going to see if patients are moving on to Ocaliva that we would assume they would see similar levels of persistency compliance. Alethia Young - Credit Suisse Securities (USA) LLC (Broker) Great. Thanks.

[Mark Vignola:]

Next question, please.

[Operator:]

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

[Ying Huang:]

Hi. Thanks for taking my questions. So maybe first on the enrollment. Can you just confirm whether you're referring to the 1,400 patients or the ultimate 2,000 patients goal when you mentioned that it will be complete in the first half of 2017?

[Mark E. Pruzanski:]

Yes. No, I was referring to the 1,400 patients because those are the critical – that's the critical cohort to support accelerated approval.

[Ying Huang:]

Okay. Great. Thanks for that. And then, secondly, I have a question on maybe your discussion with payors because what we have seen so far with some of the recent launches is that the drug may work very well and they are very effective in the clinical trial setting. But we have seen unprecedented, I guess, pushback from payors. So I was wondering – just curios what you have heard from the payors so far, broadly speaking. I am not asking to divulge any information on pricing or anything. But, broadly speaking, what do payors view the benefit and then how do they think about reimbursement, pending FDA approval? Thanks.

[Richard Kim:]

Sure. Hi. It's Richard Kim again. So, as Lisa has mentioned, we've had numerous payor interactions. And to be very candid, I think, when you look at what the payors have said. PBC isn't a disease that they've had a huge amount of knowledge on. So, as you start to think about what we've learned there, as we'd educate them on the disease, I think, a couple things. One, they have – once they understand the context, they definitely do see alkaline phosphatase as a good surrogate marker for the disease. And I think a lot of questions come down as always with most payors is really the size of the marketplace. And I think by really confirming the fact that the disease is really focused on diagnosis by both – using both alk phos and then AMA, I think, a lot of concerns around bigger patient member groups have been somewhat alleviated. So, I think, in general, I think we acknowledge that there is an unmet need for patients who are not well-controlled or intolerant to UDCA. And as we think about payor, we probably really focus on the likelihood that they will replicate deployed population for who they would focus in on in their thinking and when they evaluate the drug at P&T. So that's a high level information of what we've learned so far.

[Ying Huang:]

Okay. Thank you.

[Operator:]

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

[Mark Vignola:]

Hello, Salveen?

[Operator:]

Okay. Our next question comes from Alan Carr of Needham & Company. Your line is open.

[Alan Carr:]

Hi. Thanks for taking my questions. You mentioned earlier, Mark, a bit about the lipid study and data from a Phase 1 study around lipids in healthy volunteers. I guess that you're reluctant to extrapolate. But I wonder if you could comment about that and to the extent that it might be informative. And then also, I guess, can you give us an update on a couple of those early stage programs, 767, 777? With 767, I think, you've given guidance that you'll have that one done by the end of the year. I'm wondering what you're looking for there? What sort of profile are you looking for and where you might take it after that? Thanks.

[Mark E. Pruzanski:]

I'll let Rachel answer the question on the lipid study and I'll take 767.

[Rachel L. McMinn:]

Yeah. So I don't know if you've had a chance to read through the publication yet. But Mark summarized the key conclusions. But I think the main thing here is that this is healthy volunteers, so we can't say for sure that it's exactly like NASH. So like he mentioned, we will need to wait for CONTROL. But I know that the investment community, in particular had a lot of interest in better understanding OCA's potential effects on lipid subfraction. And so if you see within that publication, one of the key findings, as you know, there's an LDL increase associated with OCA administration. That level of increase was very similar to what you would see in a NASH population. And in the subfractions where we don't have that data in NASH, but what we do have is in healthy volunteers, you can see that the increase was driven exclusively by the increase in large LDL particles as opposed to the small dense LDL particles. We can't say again what's the significance of that. I think there's a lot of sensitivity around small dense LDL. Just given its association with higher risk of cardiovascular events, that doesn't mean that shifting it around one way or the other would have an impact on that. But I know that's just – it's really more of interest in terms of mechanism and for people who've been following that particular field. So in terms of the dose effects, there was no change in that study. Again, we'll have to see with more patients in a NASH population whether that still holds to be true, but stay tuned as we get more data from CONTROL in 2017. And then on 767?

[Mark E. Pruzanski:]

Yeah. So, Alan, with respect to 767, just to remind people listening in, this is a dual FXR, TGR5 agonist. It's about threefold more potent on FXR than OCA and also has activity on another bile acid receptor, TGR5. And the molecule has looked better than OCA in every animal model we've put it into, in liver, intestinal and kidney disease. So it's a very interesting molecule. It is, of course, another bile acid analogue and going through Phase 1 as you mentioned with completion expected by year-end. We're not prepared at this point to give any guidance beyond that in terms of where we'd like to position the molecule but, again, are very excited about it. And just to, again, highlight the fact that we're not aware of that any other – there are obviously other companies interested in these targets, especially FXR, but we're not aware that anyone other than Intercept has the capability of selectively and potently targeting FXR and TGR5 with natural bile acid analogues, which we continue to believe have superior properties, so far at least, to purely synthetic compounds targeting these receptors.

[Alan Carr:]

Okay. Thanks very much.

[Rachel L. McMinn:]

Next question.

[Operator:]

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

[Kevin Patel:]

Hi. This is Kevin Patel for Ritu Baral. For REGENERATE, how was the study conduct with respect to dropouts, has the titration regimen had an impact – the expected impact on these factors? And then secondly, for CONTROL, what do you think could be top-line versus say for medical meeting?

[Mark E. Pruzanski:]

I think you asked about dropouts as the first part of your question on REGENERATE. And we're not going to provide any details with respect to an ongoing study. But just if you refer back to the FLINT study, which was of equal duration, there were very few dropouts. The one tolerability issue we saw in insulin on OCA was pruritus which with an incidence of about one in four patients, mostly mild to moderate but only led to one discontinuation. And there was very good compliance and completion of the study and repeat biopsy rate. So we're hoping for the same in REGENERATE. And titration is not happening in REGENERATE. We are testing two doses, the 25 milligram dose that we carried forward and also a lower 10 milligram dose, but there is no titration regimen there. With respect to CONTROL, I'll let Rachel talk to that.

[Rachel L. McMinn:]

I'm sorry. Can you just repeat the question – you were a little bit hard to hear, on CONTROL?

[Kevin Patel:]

Just what do you think could be top-line versus say for medical meeting data?

[Rachel L. McMinn:]

I think it's too early to provide guidance on that. But if you look at the study, it's relatively short design timeline. So you should be thinking about based on our enrollment guidance sometime in 2017. We would likely provide some top-line disclosures and as well as present it at the medical meetings, but we're not prepared to give any specifics on today's call.

[Kevin Patel:]

All right. Thanks.

[Mark E. Pruzanski:]

Thank you.

[Operator:]

Our next question comes from Ian Somaiya of BMO. Your line is open.

[Matthew Luchini:]

Hi. Good afternoon and thank you. It's Mathew on for Ian. First, just a housekeeping question as it relates to REGENERATE. I think you mentioned 300 sites is the target. Can you confirm that all those centers are now online? And then secondly, I just was wondering if you could provide an update on where you are with your discussions with FDA regarding the Phase 2 trial in cirrhotics. I know the study was expected to start this year, but it doesn't seem like it's on trials. I doubt you'll give any guidance right now, but maybe you could at least give some sense as to when you might be prepared to talk about it.

[Mark E. Pruzanski:]

Yeah. With respect to your question about site activations, we don't comment. We don't give blow by blow on our studies. But we are well underway with the study worldwide and enrolling patients in both U.S. and Europe. With respect to this NASH cirrhosis study, we are in active discussion with FDA about finalizing the design for the study. So it's still in the planning stages.

[Rachel L. McMinn:]

Yeah. And just a quick follow-up comment there. There is not – I don't think you should consider the cirrhosis study as really having any specific regulatory issues of note. It's really more priority for the company to really execute on our PBC NDA as well as our REGENERATE study. So it's really just been more of a focus for the company to prioritize those initiatives with the cirrhosis study, certainly a high priority, but coming after those two.

[Matthew Luchini:]

Okay. Sure. Thank you.

[Operator:]

Our next question comes from Jon Eckard of Barclays. Your line is open.

[Unknown Speaker:]

Hi, guys. This is Brian (39

[Mark E. Pruzanski:]

Sure. I'll let Barbara to take the first question and I'll take the question on mechanism.

[Barbara Gayle Duncan:]

Yes. On the first question, sadly, I'm going to disappoint. We don't give out any forward guidance in terms of our expenses. I mean the only guidance we give out is for the 2016 timeframe, which we reiterated today in terms of the OpEx guidance.

[Unknown Speaker:]

Okay. Fair enough.

[Mark E. Pruzanski:]

Yeah. And with respect to mechanism in FGF19, yes, this is a target gene of FXR. It's secreted in the gut. And we've demonstrated a very clear dose dependent induction of FGF19 in our clinical trials with OCA. You were then asking about how this, how FGF19, would figure into NASH as opposed to FXR. And, again, I don't think that is very well known. There is some literature on the biologic effect of FGF19 with respect to metabolic regulation. But it's very difficult to separate it from FXR itself.

[Rachel L. McMinn:]

I have a little bit of a follow-up on that. There has been some data published last year by a company that was looking specifically at an FGF19 analogue. And you could see there that the ALP reduction was actually quite modest. So efficacy was quite limited. So I think that does provide some suggestion that there are mechanisms beyond just FGF19 alone. And we certainly have looked at our own data pre-clinically for what that's worth and compared to two others claiming to have an FGF19 specific driven mechanism. And our pre-clinical data show substantially greater activity, at least in terms of some transcript data, suggesting that hitting FXR is going to be very – broadly is going to be very important from an efficacy perspective.

[Unknown Speaker:]

Great. Thank you very much.

[Operator:]

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

[Brett Edwin Larson:]

Hey all. This is Brett Larson in for Joe, following up on an earlier question. In your discussions with payors so far, how did they intend to define inadequate response to URSO in terms of duration and/or reduction in ALP before approving a patient for OCAs?

[Richard Kim:]

Yes. It's Richard again here. So I think that's a great question. So, I think, once again, our anticipation is that the payors will basically follow obviously what the label says and what the POISE criteria were as well. So, as you know, for POISE, we had 1.67 times upper limit of normal entry criteria to be in it. I think, obviously, we'll wait upon the label depending on if anything other than ALP such as bilirubin is incorporated. But I think those likely follow the guidance of both the label and the study criteria as well.

[Brett Edwin Larson:]

Okay. Great. That's really helpful to know. And then following up as well, do you have any plans in place to offer a commercially insured patient a co-pay assistance program concurrently with the launch of OCA if approved? And if so, what would that look like?

[Richard Kim:]

Yes. We obviously know that for all medications, patient affordability is a very big issue. That's really a big focus for us. So as Lisa mentioned, we are developing what we hope to be a really strong patient services program. And we're absolutely looking at issues such as commercial co-pays that we can help address as well. But no panel decision there yet but it's absolutely something we're very cognizant around the patient affordability as well.

[Brett Edwin Larson:]

Okay. Great. Thank you very much.

[Operator:]

Our next question comes from Jeff Hung of UBS. Your line is open.

[Jeffrey Hung:]

Thanks for taking the questions. Can you provide any updates on what you're hearing from payors on access at launch or what are you anticipating?

[Richard Kim:]

Yeah. Hi. It's Richard again. So, yeah, I think as far as access at launch, I mean what we would anticipate is, as for most orphan specialty products, is there will be some coverage. It will obviously take some time to go through the P&T process and also having potential PDUFA date at the end of May gets us into some of the summer months as well. So we would anticipate a reasonable amount of coverage. Obviously that could be a lot more work to go through. And then we would anticipate sort of in around that three month time period post-approval as when we could start to see some more of the commercial coverage through P&T reviews. And of course, the Medicare – we're expecting up to the 180 (44

[Jeffrey Hung:]

Thanks. That's helpful. And then in your pre-launch activity, you said that your managed market teams have had over 50 interactions with key regional and national payors. So, on average, how many interactions that you have per payor and typically how many interactions are needed to payor ahead of their decision on coverage? Thanks.

[Richard Kim:]

Yeah. I think for the payor landscape, as mentioned earlier, a lot of the payor interactions have really been a focus on explaining the disease, similar to what we're doing with the healthcare provider audience as well. And by the way, that number is probably close to about 60 or 65 right now, even in the last week and a half. So we really focus on really educating the disease with both our medical team and our payor group as well. So I think that's really been a good foundation. And as I mentioned before, once people really understand ALP as a reliable surrogate marker, they understand how the patients are diagnosed, I think, it's done a lot to really bring PBC board and people's minds as well. So we'll continue the dialogues and obviously up through the approval. And, clearly, we'll be pretty busy touch with once we're approved as well.

[Jeffrey Hung:]

Thanks.

[Operator:]

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

[Liisa A. Bayko:]

Hi. Actually the majority of my questions have been answered. But perhaps just a quick one on what – can you give us a rough screen failure rate for the trials for REGENERATE? Thanks.

[Mark E. Pruzanski:]

Yeah, Liisa. We're not providing any metrics on an ongoing study like that. But suffice to say that this is a histologic screening study. So we've got to identify patients with definite NASH, with stage 2 and stage 3 fibrosis and a NAFLD Activity Score of at least 4. So clearly there are going to be patients who don't meet all of those criteria and are going to screen failed.

[Liisa A. Bayko:]

Thanks.

[Operator:]

Our next question comes from Salveen Richter, Goldman Sachs. Your line is open.

[Unknown Speaker:]

Hi, guys. This is actually Tom (46

[Rachel L. McMinn:]

So a couple of points. One is that probably the key focus is less on – lipid metabolism is obviously a key endpoint. But I think the other really critical outcome of the study is the impact of statins on LDL. So I would just highlight that as something that's probably got more relevant to just helping physicians understand how to use statins in combination with OCA. In terms of efficacy, the patients enrolled are biopsy proven NASH patients, they will be, with the eligibility criteria from earlier stage fibrosis, up through (47

[Unknown Speaker:]

Okay. And you would plan to share that data or -?

[Rachel L. McMinn:]

Well, so, yeah. The top-line data and the data that would be available in 2017 would really be around the primary endpoints, which would be statin impact as well as lipid metabolism. Any efficacy read – there is not going to be much to say unless you're looking at surrogate markers of efficacy like ALT which, I think, called limited relevance for clinicians, but in terms of future biopsy data, that would be much further down the road. So it could be collected. Certainly patients will be followed. And it may be of interest, but certainly wouldn't be the primary focus of that dataset.

[Unknown Speaker:]

Okay. Got it. Thanks again.

[Operator:]

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

[Joel L. Beatty:]

Hi. Thanks. Questions actually on PSC. A couple months ago, there was a workshop for the FDA, AASLD on trial endpoints. Were there any takeaways from that meeting that helped with the outlook for OCA?

[Mark E. Pruzanski:]

Yeah. I'm glad you asked the question. So PSC, primary sclerosing cholangitis, is, I call it, a brother disease to PBC autoimmune cholestatic liver disease, about a third is prevalent, but with no approved treatments and a very nasty disease course. The workshop that FDA hosted was very informative and highlighted the fact that the agency is really engaged in working with industry and sponsors and the academic hepatology communities to try to come up with a viable regulatory path. I think that where we came up – because of the very stop and go nature with flares in this disease that results in alkaline phosphatase spiking during flares, it was determined that although so far clinical data so far with alk phos is definitely intriguing and this biochemical marker should be used as an endpoint, probably is not sufficient. So it will be coupled with a clinical endpoint, which could be another surrogate endpoint, it just isn't clear yet. So we're thinking that what will emerge is probably a dual endpoint in this disease. One thing that we put out today was guidance on AESOP, our ongoing Phase 2 study, enrolling 75 PSC patients. And we're guiding completion of enrollment by year-end this year. So we expect to have a data readout next year. And at that point, we'll determine the course forward in this indication.

[Joel L. Beatty:]

Thank you.

[Mark Vignola:]

And operator, we have time for just one more question.

[Operator:]

Okay. Our next question comes from Brian Skorney of Robert W. Baird. Your line is open.

[Neena Bitritto-Garg:]

Hi. This is Neena on for Brian. So I just have a question again about the OCA lipoprotein metabolism study you published in healthy volunteers. So I know you said that there was an increase in large LDL particles, but no change seen in the smaller dense particles. Can you tell us a little bit about what sort of preclinical data you might have that might indicate why that's occurring? And that's all. Thanks.

[Rachel L. McMinn:]

Honestly, no, we don't have that kind of data. I mean, I would just back up and say there is not really a good translational model for human lipid data. So if you look at rodent data, you'll see that OCA has very different effects on lipid particle. So I'm not sure that that would even be really feasible to study based on the models that are currently available.

[Mark E. Pruzanski:]

Yeah. And I would just add that even in primate models, as have been published, OCA lowers cholesterol. So really there is no good interspecies comparison there. And anyone evaluating, at least an FXR agonist, I think, really needs to see what happens in the clinic and, ultimately, in actual patients because, as we've shown just comparing PBC with NASH, OCA's effects on LDL and other cholesterol fractions is very different. And that's why we're cautioning against read through from the healthy subject Phase 1 study, while at the same time acknowledging that the pattern out there with respect to direction of LDL increase did match up well with what we observed in NASH.

[Mark E. Pruzanski:]

So with that, I guess, we're out of time. And I just want to thank everyone who has listened in today on the call.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.