Intercept Pharmaceuticals, Inc.
Q1 2015 Earnings Call Transcript

Published: 11 May 2015

[Operator:]

Thank you for joining the Intercept Pharmaceuticals’ 2015 First Quarter Financial Results Conference Call. At this time, all participants are in a 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’s website for two weeks from today’s date. At this time, I would like to introduce Mr. Senthil Sundaram, Intercept’s Senior Director of Corporate Development. Please go ahead.

[Senthil Sundaram:]

Good morning and thank you for joining us on today’s call. We are reporting on financial results for the quarter ended March 31, 2015. 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 in our regulatory, clinical and commercial plans, goals and estimates as well as other statements which relate to future events. These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in our reports filed with the SEC, including the Risk Factors section of our most recent Annual Report on Form 10-K and in Intercept’s other filings with the SEC. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events or otherwise. The format for today’s call will include opening remarks from Intercept’s management team and then we will open up the call to take your questions. At this time, it’s my pleasure to turn the call over to our CEO, Dr. Mark Pruzanski.

[Mark Pruzanski:]

Thank you, Senthil and thanks everyone for joining us on the conference call and webcast. I am going to provide you with a brief update on the development of our lead product candidate, obeticholic acid or OCA. Barbara Duncan, our Chief Financial Officer, will then discuss our financial results and cash position. The first four months of 2015 were an extremely busy but exciting time for the company and I am very proud of what the Intercept team has accomplished, particularly during a period of significant operational growth in the U.S. and Europe. Key milestones include receiving breakthrough designation for OCA, the successful completion of all supporting studies for the NDA and MAA filings, analysis and presentation of important FLINT data at recent hepatology meetings, and the completion of two successful equity offerings, providing the company additional capital in excess of $550 million. I look forward to delivering more good news to you as we continue to execute on our plans this year. Starting with our PBC program I would like to provide the following updates. First we are on target to complete our regulatory application the NDA and MAA for marketing approval of OCA in the U.S. and Europe this quarter. Next Lisa Bright was named Chief Commercial and Corporate Affairs Officer earlier this year and under her strong leadership OCA pre-launch activities are well underway, including market research, reimbursement and market access work as well as building up teams in our core countries to support the launch. We continue to endeavor to attract the best talent across functional areas as we build up our global infrastructure with key recent hires in the U.S. and in number of European countries. I look forward to introducing Lisa to you in the coming months. Finally, the recent EASL meeting in Vienna generated important new insights relevant to enhancing the medical community's understanding of the unmet need in PBC. Presentations from the global PBC study group and UK PBC study group further reinforced Alkaline Phosphatase and Bilirubin as a valid surrogate markers, highly predictive of transplant-free survival. Publication of these new data is expected later this year. Turning to our NASH program, a few key highlights. A couple of recent publications reinforce prior data showing that the development of liver fibrosis is the most important predictor of liver related clinical outcomes and all-cause mortality. A recent study conducted by the late Dr. Paul Angulo at the Mayo Clinic, that followed over 600 NASH patients for an average of more than 12 years showed that fibrosis was the sole, relevant histopathologic features predicting adverse clinical outcomes. Another recent paper by Dr. Quentin Anstee followed a cohort of NAFLD and NASH patients for an average of about 6.5 years and showed about 40% of patients in both groups experienced fibrosis progression. Remarkably, more than 40% of the patients with baseline NAFLD developed NASH and a little more than 20% progressed all the way to stage three bridging fibrosis. Diabetes was the major co-morbid disease associated with fibrosis progression in the NAFLD patients. Meanwhile, among those patients with already established NASH at the beginning of the study approximately 10% with stage one or stage two fibrosis and 35% of those with bridging fibrosis became cirrhotic in a period of a little more than six years. We believe that these data provides further support for our approach and targeting reversal of fibrosis along with other key histopathologic features with steatohepatitis as the basis for altering the clinical course of NASH and patient outcomes. We also believe that these findings further underscore the relevance of FDA’s designation of OCA as a breakthrough therapy and NASH patients with liver fibrosis and the need for effective therapies to address this high unmet medical need. We are very pleased with our ongoing interactions with both FDA and EMA as well as the degree of cooperation between both agencies and per our prior guidance we are on track to finalize our Phase III program this quarter. So we are looking forward to sharing more information on the Phase III trial design with you in the very near future and will not be providing any additional specifics on today's call beyond what we have previously outlined. Meanwhile, our belief in the potential for OCA to become an important novel treatment for NASH has grown based on New FLINT data analysis presented at the AASLD Colloquium in March and at EASL this past month. On the efficacy side in an analysis of 80% of the FLINT patients with fibrosis mirroring our intended Phase III study population, we saw consistently greater proportion of OCA treated patients with reversal of fibrosis by at least one stage, including a substantial subset of patients experiencing complete resolution of fibrosis and otherwise a significant attenuation of fibrosis progression as compared to placebo. In fact in the NASH patients most at risk of progression to adverse outcomes those with co-morbid diabetes and stage II or stage III bridging fibrosis close to 50% so our fibrosis improved by at least one stage after just 72 weeks of OCA treatment as compared to about 20% of placebo patients. Separately in an assessment of cardiometabolic parameters in the entire FLINT patient population, OCA treatment resulted in weight loss as well as significant lowering of systolic blood pressure in patients with hypertension both clinically important cardiovascular risk factors. While OCA treated patients experienced an increase in LDL cholesterol patients newly initiating statin therapy in response to such LDL increases experienced a rapid reversal to levels below baseline and not different from placebo patients newly initiating statin. These data along with the recent publications and AASLD and EASL guidelines recommending statin therapy and NASH patients provide support for the thesis that OCA associated LDL increases maybe effectively managed with standard statin therapy. You can find additional details on the scientific presentations on our website or the AASLD and EASL websites. I’ll now turn the call over to Barbara to review our financial position.

[Barbara Duncan:]

Thank you, Mark. Good morning everyone. Please refer to our press release issued earlier today for a summary of our financial results for the period ended March 31, 2015. We ended the quarter with $402 million of cash, cash equivalents and investment securities available for sale on our balance sheet, or approximately $769 million on a pro forma basis for the $367 million of net proceeds we’ve received from the equity offering we completed in April of 2015. For the full-year 2015, we reiterate our adjusted operating expense guidance in the range of $180 million to $200 million, which excludes stock-based compensation and other non-cash items. While our adjusted operating expenses totaled approximately $31 million in the first quarter, please keep in mind that we expect operating expenses to continue to increase over the course of the year. These expenses will support the clinical development program for OCA in PBC, NASH in PSC, expansion of our clinical, regulatory, medical affairs and commercial infrastructure in the United States, Canada and Europe, expansion of OCA manufacturing activities to not only the preparation of the PBC commercial launch, but also planning for success in NASH as well as advancement of INT-767 and other preclinical pipeline programs. Adjusted operating expense as presented above is a non-GAAP financial measure. We anticipate that stock-based compensation expense will represent the most significant non-cash item that is excluded in adjusted operating expenses as compared to operating expense under GAAP. Our detailed financial results are contained in our press release issued this morning. In relation to the $226.6 million warrant reevaluation expense recorded in the first quarter of 2014, we call that in connection with some of our pre-IPO equity financing, we issued warrants that were classified as liabilities and were adjusted to fair value on a quarterly basis with the change in the fair value being included in net loss. The last of the warrants were exercised on a cashless basis in April 2014, so there were no such expenses after that time. Let me now turn the call back over to the operator to open the line for questions. We will have to keep the Q&A brief as we have a hard stop today at 10

[Operator:]

Thank you. [Operator Instructions] And our first question comes from the line of Michael Yee with RBC Capital Markets. Your line is now open.

[Michael Yee:]

Okay, thanks. Good morning, hey, everybody. Two quick ones. One, you mentioned Lisa Bright preparing everything. Maybe just a big picture, how should we think about what preparations you are doing for this launch? More importantly, once it is approved, how should we think about uptake of that type of drug? I know it is a little bit far out, but preparing people for how we should be thinking about the uptake, is that a super-fast uptake? Is that a patient uptake? Have you identified where the patients are? Just maybe talk a little bit about your preparations there? My second quick one was just – I know you have guided to starting Phase 1 on your second compound, 767. Can you remind us what the differences are there, or what we'd be for? Thanks.

[Mark Pruzanski:]

Sure Mike thanks. So with respect to the first question what Lisa is doing and that just to remind our listeners this morning that Lisa was one of the architects of the Sovaldi launch while at Gilead. So she comes with extremely relevant commercial launch experience with respect to OCA's potential in PBC NASH and beyond. What I can tell you this morning is that with Lisa's leadership we have been implementing a pre-commercial launch strategy we've been attracting very good talent to the company in the U.S. and several European countries as I mentioned in my prepared remarks. And we feel very good about our preparations we’re making in advance of launch anticipated next year assuming that regulatory review goes as planned. We’re not prepared at this time it’s premature to provide any further guidance with respect to commercial launch and rate of uptick and stay tuned for that later on when I introduce Lisa to you and the rest of the investors. In the meantime with respect to I mean I can go into a little bit more information about the market opportunity, but that remains unchanged from our prior guidance with respect to the number of patients out there that we could potentially target with PBC that number in the major markets remains at 30,000 patients with upside in identifying additional patients over time who are not yet diagnosed out there.

[Michael Yee:]

I guess just more specific – are you working to identify where the patients are? Have you had early discussions with managed care in terms of you thinking about reimbursement for this orphan type of drug, et cetera, et cetera?

[Mark Pruzanski:]

Yes. What I can tell you I mean I mentioned the UK PBC Group and just to let you know I’ve said this before they have over 6,000 living patients just in the UK alone in their database right, so the answer is yes, we’re gaining a better appreciation for where these patients are, who is treating them et cetera. And at this point we’re not prepared to comment further, but suffice to say that, we are doing reimbursement work and so we’ll be able to provide you more detail as the year progresses.

[Michael Yee:]

Okay.

[Mark Pruzanski:]

Okay. Yes, with respect to INT-767 and thanks for asking the question, we continue to guide that we will have this compound into the clinic by year end, you asked about the difference from OCA and what I'd say is that it’s a three fold more potentit’s also bile acid derived compound, it’s a three fold more potent as an FXR agonist also has TGR5 the second bile acid receptor activity and head-to-head against OCA and every single animal model across chronic liver disease G.I. intestinal disease and renal disease, it performs better than OCA. So we are very excited about INT-767 and intend forward to be our next compound into the clinic.

[Michael Yee:]

Okay, thanks.

[Operator:]

Thank you. And our next question comes from the line of Alethia Young with Deutsche Bank. Your line is now open.

[Alethia Young:]

Hey, thanks for taking my questions, two. One, I just want to know how you think clinicians and regulators are weighing the benefits of cardiovascular risk versus improving fibrosis? And then I will ask a quick question after that.

[Mark Pruzanski:]

Sure. Well, I think as you know cardiovascular morbidity mortality is the leading issue in this population. So of course cardiovascular safety for any drug is important, but there are many ways as I mentioned on the call we recently put out this statin subgroup data from FLINT and I think that there is a general and growing appreciation out there number one that NASH patient should be on statins most if not all should be on statins and that's occurred both AASLD and EASL guidelines. There is a clear understanding based on literature and also reproduced in our FLINT data that statins can be safely used in patients with liver disease and with NASH and improve our cardiovascular outcomes also appear to be additive when used with OCA and lowering liver enzymes. So there is a very clear thesis for using statins is this population to manage cardiovascular risk and as you know there are other agents already available in the market or coming to the market soon. In the meantime there are no therapies to treat NASH which as you know has overtaken alcoholic liver disease to become the second-leading indication for transplant and in the next few years will overtake hepatitis C to become the leading indication for transplants. So there is a tremendous unmet need here and as I mentioned on the call that is growing evidence for the pivotal role of fibrosis as the histopathologic features to monitor and to treat in this patient population. It's just alarming to see in a cohort of NAFLD patients these are theoretically patients without steatohepatitis without NASH at baseline progress so quickly to NASH and develop fibrosis in a period of just over six years go from zero to bridging fibrosis stage just before cirrhosis.

[Rachel McMinn:]

Alethia it’s Rachel I just want to add on just a couple of comments on what Mark said, keep in mind in addition to the statin work that he mentioned that OCA is also associated with weight reduction and blood pressure reduction in hypertensive patients based on sub-analysis and analysis coming out of FLINT. So when you kind of tie everything together you’ve got some positive cardiometabolic affects induced by OCA on weight loss and blood pressure and then on the other side with the LDL increase as Mark mentioned, we believe that this can be effectively treated with statins and overall we remained very optimistic on the overall picture of OCAs affects on the cardiometabolic.

[Alethia Young:]

Thanks Rachel, it’s very helpful. And then, the next question. Do think that FDA is going to hold all of these NASH drugs to the same standards as far as end point? Or is it going to be balanced between safety and endpoints – just what's your general flavor there?

[Mark Pruzanski:]

You know it's a good question and obviously there is no current President for regulatory pathway in this disease. As I mentioned you we’re very pleased with our progress with FDA and EMA in defining of the Phase III registration program and will soon come back to you with details on the design of the Phase III. I can speak for FDA or EMA and so I can answer that question I don't know there will be you know different potentially usable endpoints in different subpopulations of NASH patients, but I can say is that we’re working with FDA closely in the context of defining a path in the breakthrough designated population those patients with fibrosis. And you know we think that in any case I keep talking about fibrosis but I do think that the most important feature here that we are addressing along with other key histopathologic NASH features. And with FLINT data showed for the first time the ability to reverse fibrosis in a relatively short period of time. And therefore frankly feel that we have raised the bar on the field. So we can only speak for our program and what we think OCA can do and showcase in Phase III.

[Alethia Young:]

Great thanks for the update.

[Operator:]

Thank you. And our next question comes from the line of Yaron Werber with Citi. Your line is now open.

[Yaron Werber:]

Great. Thanks for taking my question. I have just a couple of questions. The first one is, when you think about, Mark, I think you've talked in the past about potentially looking for some surrogate markers be it biochemical and even more importantly radiological, to try to move – I don't want to call it move way, but try to shorten time to an endpoint in NASH, away from fibrosis. Can you give us a little bit of a sense what your thinking about and when that study is going to start? Secondly, and it is sort of for the group, and obviously, definitely for Mark. Some pills going to move to BD a little bit, it looks like you guys are thinking about combination approach or even bringing in more compounds. How would that work? Would that work in compound with OCA? Or is that going to – because at the same time, your moving to 767. Thank you.

[Mark Pruzanski:]

Thanks, Yaron. Yes I think we’ve said and other companies pursuing NASH who said that we simply have to move away from biopsy over time both for diagnosis and for staging patients and frankly in the context of developing new therapies to treat this disease. This is a view shared not just by us, but all relevant stakeholders including regulatory agencies. So there's a lot of support out there for doing this unfortunately we don't have one yet or some kind of composite we are in the Phase III going to be investigating other non-invasive modalities including imaging and biomarkers potentially even so-called functional tests, quantitative functional liver tests in an effort to correlate with histology with biopsy such that eventually we can move away. You alluded to additional study beyond the Phase III I’ll take the opportunity to say that as I’ve said before that the pre-cirrhotic Phase III study we’re planning is our first focus, but we will be following up with additional studies we’ve talked about the standalone Phase II lipid study, we intent to start a little later this year, we also said that we’re going to starting a cirrhosis study, just a question of when, not from – it’s premature now to give guidance and when we start that study and then potentially other studies to facilitate shortening of the lifecycle here for our drug development in NASH. All again with a primary goal or one of the goals being identifying non-invasive modalities to get rid of biopsy. With respect to your second question in BD we’re not going to comment right now on BD activity, but I’ll say that this is a huge heterogeneous disease. We do think that over time while we feel absolutely that OCA's is an FXR agonist, if the optimal approach currently in the clinic and development, we believe that this disease will end itself to multiple different approaches mechanistically over time and I wouldn't be surprised to see combination regimens evolved and that’s certainly something that we are interested in looking into. And Rachel will say a couple of things

[Rachel McMinn:]

Yes, I think you summarized most of what I wanted to say, the only other thing I would emphasize Yaron is that we think that the effects that we are seeing with OCA are really differentiated, we’ve got statistically significant improvements in fibrosis at only 72 weeks and we are hopeful that will improve with time, obviously we need to show that in larger and longer studies. But then certainly to Mark’s point and your point about combination this is a very heterogeneous diseases a lot is not really known between genetics and just all the different facets of the disease. So it makes sense that over a long period of time you’d want to develop not just OCA, but a combination regimen.

[Operator:]

Thank you. And our next question comes from the line of Matt Roden with UBS. Your line is now open.

[Matthew Roden:]

Great. Thanks very much for having me on the call. Based on your comments over the past several weeks or months, it seems that you have a pretty clear picture of what your Phase 3 program is going to look like in NASH. I know you said you didn't want to talk about it specifically, but I have sort of a different twist on the question. I infer, based on your comments, that what you have said is based on the regulatory interaction. Can you talk about gating factors for getting that up and running? You have been consistent in saying that can happen this quarter. Would it be wrong to infer that the protocol is basically agreed, but it's simply a matter of just waiting for formal written minutes from the FDA, to formally announce? Just trying to understand what you said and what the basis of the confidence is in the next steps and in the protocol that you've talked about?

[Mark Pruzanski:]

Yes, Matt, yes thanks for the question and I appreciate the interest in this. What I’ve said before this is a huge precedent-setting program in NASH it is breakthrough within the FDA meeting that it's been elevated to the attention of senior leadership tutor who have been involved and it is a large complex program and recall that what I have said in the past is what we are hoping to do here is a placebo-controlled outcomes trial with the nested interim analysis at the same time point is FLINT to read out on for accelerated approval. So there is a lot of ground to cover with the agencies that there are program like this multiple interactions, ongoing interaction very happy with those interaction and like I alluded do on the call we are still on track to complete the discussions necessary to finalize the program this quarter and we do intend to come back to you at that point with the relevant details of the design.

[Matthew Roden:]

Okay. Secondly, a kind of related question to Yaron's, you are pretty well capitalized at this point. So does the state of the balance sheet, in any way, relieve capital constraints for either internal or external R&D? So, what is the right expectation for additional pipeline opportunity for you guys? And to what extent of the capital situation change that?

[Mark Pruzanski:]

Well, we are very happy with our balance sheet right now we do have ample additional capital available to execute on our plan starting of course with the launch of OCA and PBC that as Barbara mentioned the number of other activities including the development of our pipeline and beyond 767 we are very interested in additional opportunities to develop the pipeline.

[Matthew Roden:]

Okay. Thanks for taking the questions.

[Mark Pruzanski:]

Okay.

[Operator:]

And our next question comes from the line of Ian Somaiya with Nomura Securities. Your line is now open.

[Ian Somaiya:]

Thanks. I just had two quick questions. One, I know we are shifting our focus to the Phase 3 trials and the design of the trials. I was hoping you could just maybe help set expectations for the remaining Phase 2 study in NASH, the Japanese study? How should we think about the data, and what do you hope to learn from that trial? The second question was, if you could just comment on the role of FXR in hepatitis B and your plans to pursue that?

[Mark Pruzanski:]

Yes, so the SDP of course our partner in Asia they’re conducting a 200 patient NASH study, it’s expected to read out prior to year-end, this is not in any way of gating for our Phase II trial, it is a Phase II trial as is FLINT and therefore supportive, but not pivotal. What distinguishes it from the FLINT trial is that it included three doses 10, 20 and 40 mgs once a day of OCA. So one thing that we are interested in seeing is whether there was any kind of dose effect both on histology potentially and also another markers, biomarkers and lipids for example. But again this is supportive, keep in mind that 200 patients with forearms there are only 50 patients per arm. So we’re not - this is not powered on fibrosis as frankly was influenced, but significantly smaller sample size that we’re talking about here so purely supportive.

[Barbara Duncan:]

And the other thing I would add is that even though there is a dose ranging study as Mark said we’re not looking for this to inform Phase III as you know the Japanese population is very distinct population even though there are some similarities and many similarities between Western NASH and Japanese NASH it’s important to recognize that the BMI of a Japanese NASH population is substantially lower. So it’s unclear whether the doses and the effects that are seen in the SDP trial would be actually translatable to a Caucasian population. So I just want to throw that out there and mention that dosing in Japanese across the pharmaceutical industry is typically lower than in Caucasian. So whatever you learn for 20 mgs for example might not be translatable to doses that we’re planning on using. So well it will as Mark said help us understand whether there are dosing effects it might not be translatable.

[Mark Pruzanski:]

And as very quickly in your question about hepatitis B I think what you're alluding to is that there is rationale out there and potential interest out there in FXR agonist treatment in hep B, we are evaluating a number of potential additional indications to the ones that we are currently pursuing, but it's premature now to comment on whether or not will pursue hepatitis B.

[Ian Somaiya:]

Thank you very much for taking my question.

[Mark Pruzanski:]

Thanks, Ian.

[Operator:]

Thank you. And our next question comes from the line of Ritu Baral with Cowen and Company. Your line is now open.

[Ritu Baral:]

Hi, guys. Thanks for taking the question. Any new thoughts on your NASH lipid study trial design? Have there been any new understanding or new findings around the FXR mechanism as it relates to LDL?

[Rachel McMinn:]

Hey Ritu it’s Rachel, no really no change in our thinking there I think we’ve given some initial broad commentary on this really the Phase III program has taken up the bulk of our time and focus and that’s really why the lipid study is something that’s been still a very important priority, but because it’s not dating for Phase III it’s just a study that’s starting a little bit later this year. What we’ve talked about in the past is doing several different doses of OCA and also doing some different titration work with statins. And so if this study should give us a very clear understanding of the effect of OCA on lipids both from a dosing effect as well as from a ability of statins to mitigate LDL increases who will also be looking at lipid subtractions in that study. So that’s no change from our thinking previously.

[Ritu Baral:]

Understood. A quick follow up. Your Phase 2 PSC study that is due to start, any updates there? Any additional details on trial design there?

[Mark Pruzanski:]

Thanks Ritu, so we initiated Sclerosing Cholangitis Phase II in December that is currently enrolling premature at this point to give any guidance on when we'd expected to read out, but this is a very important indication for us.

[Ritu Baral:]

Great. Thanks for taking the questions.

[Mark Pruzanski:]

Thanks, Ritu. End of Q&A

[Operator:]

Thank you. And that does conclude our question-and-answer session. Ladies and gentlemen thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.