Intercept Pharmaceuticals, Inc.
Q3 2015 Earnings Call Transcript

Published: 9 Nov 2015

[Operator:]

Thank you for joining the Intercept Pharmaceuticals 2015 Third 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 Dr. Mark Vignola, Intercept's Director of Investor Relations. Please go ahead, sir.

[Mark Vignola:]

Good morning and thank you for joining us on today's call. We're reporting our financial results for the quarter ended September 30, 2015. Before we begin, please remember we'll 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 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'll 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 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 an update on the development of our lead product candidate, obeticholic acid, or OCA. Lisa Bright, our Chief Commercial & Corporate Affairs Officer, will provide an update on our commercial preparations. Barbara Duncan, our Chief Financial Officer, will then discuss our financial results and cash position. 2015 continues to be a year of execution for Intercept. And over the last few months, we've had key developments in not only our development program for OCA, but also in our evolution towards a fully-integrated commercial entity. Starting with our PBC program, I would like to provide the following updates. First, I am excited to announce that based on strong patient advocacy and with the support of PBC thought leaders, a number of official hepatology bodies, including the American Association for the Study of Liver Diseases, AASLD; and the European Association for the Study of the Liver, EASL, recently formally endorsed changing the name of primary biliary cirrhosis to primary biliary cholangitis, still known by the acronym, PBC. We actively supported the effort to rename the disease and believe the change will help patients with this autoimmune liver disease ease the stigma often associated with the term cirrhosis. In August, we announced that the FDA granted priority review for OCA in PBC, with a PDUFA date of February 29, 2016. We are pleased that the FDA has been very engaged with us in the review process and we continue to expect and are preparing for an advisory committee meeting early next year. Keep in mind that OCA, if approved, will be the first new medicine for PBC in 20 years. We are also continuing our regulatory process in Europe and continue to plan for approval and launch in the second half of 2016. As we move towards potential OCA regulatory approvals in 2016, we continue to make great strides in building up our commercial infrastructure to support global product launches, which Lisa will update you on in a minute. I'm also excited to announce that we will be hosting an Analyst Day and an Investor Day in New York City on December 1, 2015, to provide a more in-depth review of our commercial strategy. Now, turning to our NASH program, in September, we announced the initiation of our Phase 3 REGENERATE trial. This is the first Phase 3 registrational trial in non-cirrhotic NASH patients with advanced fibrosis, a serious chronic liver disease with no advanced therapies. The FDA designated OCA as a breakthrough therapy in this patient population earlier this year and, coordinating with the EMA, helped us define a regulatory path toward eventual approval for this indication. REGENERATE will be a very robust trial with two key objectives

[Lisa Bright:]

Thank you, Mark. So, over the last few months, we've been really busy as we prepare for the approval and expected launch of OCA in PBC, and I'm very excited to be able to share the following updates with you. Being launch-ready in the U.S. remains of course our top priority and our preparations have accelerated since the arrival of Richard Kim, our Head of Commercial U.S. We've now completed the hiring of 45 territory business managers, and most of them bring significant experience in liver diseases. Our TBMs are fully trained and are now in the field, with the goal of introducing our company to our customers and also to help better understand how our target customers currently treat patients with PBC. We're also well underway planning for launches outside the U.S. and to date, we have appointed 10 experienced regional and country general managers across 17 European countries, including the UK, France, Germany and Spain, and also in Canada, who have in turn established small and highly experienced team to focus on preparations for market access. Lastly, we recently launched three disease awareness websites to help PBC patients better understand the disease and improve the dialog between physicians and patients; rethinkpbc.com supports physicians in the U.S., while livingwithpbc.com and pbctogether.com are designed for patients in the U.S. and the EU, respectively. The progress that we've made so far in 2015 has been exceptional, and I'd like to take this opportunity to thank our team for that ongoing effort. I look forward to providing you with a broader review of what we've done so far at our Analyst and Investor Event in New York on December, the 1st, this year. I'll now turn over the call to Barbara to review our financial position.

[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 three-month and nine-month periods ended September 30, 2015. We ended the quarter with $696 million of cash, cash equivalents and investment securities available for sale on our balance sheet. As you may recall, we provided adjusted operating expense guidance of approximately $240 million for the full year 2015. We anticipate that our adjusted operating expenses for the full year 2015 will fall below our guidance of $240 million. This is driven primarily by the timing of hiring of personnel, certain clinical trial and related expenses, market and medical research expenses and manufacturing-related purchases for OCA. The build-out of the company's commercial infrastructure remains on track with the recent hiring of the U.S. sales team in October 2015 and continued infrastructure expansion in clinical development, regulatory and medical affairs is ongoing. While we are not providing specific 2016 expense guidance at this time, we would like to impress upon you that we expect a significant step-up in adjusted operating expenses next year that I'll detail for you now. Much of our head count increase has occurred late in 2015. So, it is important for you to understand – to consider an annualized rate in your models, which would include the 45 territory business managers that Lisa just mentioned in her remarks that came on in October of 2015. Second, we expect greater commercial spending driven by the anticipated approval of OCA in the U.S. in the first quarter of 2016, with increased spend in our European build-out during the year. Finally, we expect substantial increases in 2016 R&D expenses, driven by execution of a robust NASH development plan, including the REGENERATE trial, which was initiated in September, a controlled NASH statin study, which we'll be initiating this quarter, and several other trials we initiated in 2016 (12

[Operator:]

Our first question comes from Matt Roden from UBS. Your line is open.

[Matthew Roden:]

Hey, guys. Thanks for taking the questions. Good morning. I'm interested in the PSC study, give us an update on the AESOP study. First, maybe can you, Mark, can you just remind us your thoughts on the underlying pathophysiology in PSC and its degree of similarity to PBC; and accordingly your level of confidence that we've seen in PBC suggest benefit in PSC as well? And then finally, what level of alk phos reduction would you need to see in the AESOP study to get significance in this – I think it's 75 patients split into three arms? So maybe if you can tackle those, and then I have one or two follow-ups.

[Mark E. Pruzanski:]

Yes. Thanks for the question, Matt, and thanks for asking about a very serious disease that we don't have a chance to talk about very often. PSC, primary sclerosing cholangitis, I call it essentially a brother disease to PBC because inasmuch as PBC is a disease of women, PSC is more typical in men. It is an autoimmune cholestatic liver disease, about 1/3 is prevalent as PBC with no approved treatments, and it's pretty devastating in its course for a lot of patients. This is generally considered a large duct disease as opposed to PBC, as small duct disease. So it does histologically present differently. Patients with PSC are at a much higher risk of developing cholangiocarcinoma, and (15

[Matthew Roden:]

Okay. Thanks for that. And then, I guess maybe can you talk a little bit more about the recruitment? You mentioned that you're going to have to or you have increased the number of trial sites to speed enrollment. Maybe can you talk about what you think that implies for the number of treatable patients out there and also just potential timing of readout?

[Mark E. Pruzanski:]

Yes. I mean look, it's a rare disease as I mentioned, with respect to prevalence. We need to nail down -- I mentioned the prevalence of 1/3. Obviously a smaller fraction of that number are actually diagnosed and identified out there. You also mentioned the 75; that's correct. There are 25 patients in each of three arms to enroll. We're not going to comment at this point in terms of when we expect to have data available. But we're very committed to the study, hence the doubling of sites to accelerate enrollment.

[Matthew Roden:]

Okay; great. And then, just real quick, shifting gears to 767. Can you talk about operationally the steps you'll take once you're in the clinic? I presume you would start off with a PK study. Can you talk about what you'd expect to see vis-à-vis OCA and whether or not this would initially be in healthy volunteers or in patients? And then lastly what you think the appropriate indications would be to pursue because, you can imagine, you could take this in a couple of different directions. So, just like to get your latest thoughts on that. Thanks very much.

[Rachel L. McMinn:]

Hey, Matt, it's Rachel. I'll take that question. So, you're correct in this is going to be our first-in-man study; so single ascending dose study in 2016 to give us a good sense of pharmacokinetics as well as initial safety data. At this point, it's just too early in the development to really talk to specific indications, that we will be providing more information on that, once we have a better assessment of coming out of this initial study. But as Mark said, this compound has the potential to be very differentiated from OCA, it's certainly significantly more potent by FXR assays, in vitro and a lot of the animal work shows some compelling profiles relative to OCA. So, how that turns out into the clinical, we'll just have to wait and see.

[Matthew Roden:]

Good. Thanks for taking the questions.

[Mark E. Pruzanski:]

Thanks, Matt.

[Operator:]

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

[Michael J. Yee:]

Hi, thanks, good morning. Couple of follow-ups; first, just following up on 767, can you actually remind us if there is specific evidence suggesting differences in cholesterol profile or more importantly, pruritus or some of those other tolerability questions that would differentiate it. I know, there is another – I know, it's different, but there is another FXR agonist in the clinic that appears to make those claims. I just wanted to try and understand the profile of 767 other than just potency? And then, second question on PBC, can you just give us your latest thoughts on your dialog with FDA as it relates to a panel whether you've been essentially told to expect one and we're coming upon 60 days to January. So, just trying to understand that a little bit and your latest discussions and thoughts there? Thanks.

[Rachel L. McMinn:]

Thanks, Mike, for the question. I'll take the first one and Mark will take the second one. So, on 767, again, it's probably too early to say, there is no good preclinical model that can project cholesterol changes or pruritus changes, if you recall, OCA actually showed a substantial decrease in cholesterol in animal models and we just see unique findings in the clinic. So, I think, for anybody making those claims without actually being in the clinic and having human data, I would just be skeptical of that for right now. So, I think, you are referring to a competitor hoping that they'll have differentiated claims. So, I think, it's just too early to say right now, so stay tuned on that.

[Michael J. Yee:]

Okay.

[Mark E. Pruzanski:]

Yes, and, Mike, with respect to the panel, as we've said before, we are expecting a panel, we're planning for it, we've been engaged in mock panels as part of our intensive preparation. And that's – we'll make an announcement. When the – if and when the panel actually publishes online, we'll make the announcement at that time, expect that to be about six weeks before the actual panel.

[Michael J. Yee:]

Okay, so you are thinking six weeks before, so that's fairly close, but that's what you discussions have suggested.

[Mark E. Pruzanski:]

I think that's pretty typical.

[Michael J. Yee:]

Okay, okay. Thanks.

[Mark E. Pruzanski:]

Thanks, Mike.

[Operator:]

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

[Jonathan M. Eckard:]

Good morning. Thanks for taking the questions. The first question was again going to be on the panel. Have you done analysis of the members on this panel, to understand what their background has been in PBC, and I guess depending on that level of understanding of the disease, again, what kind of additional preparations may that take to help the education process during the panel, and I have another follow-up?

[Mark E. Pruzanski:]

Yes, thanks, Jon. So, we don't know who the members are going to be. I don't think we're going to find out until just a couple of days before, again, that's I think pretty typical. We're preparing for all kinds of scenarios and that most especially the fact that we will have generalists on that panel, we can expect to have gastroenterologists, who are not as familiar with the disease, and of course we are preparing for that.

[Jonathan M. Eckard:]

Okay, great. And then on the NASH lipid trial and the cirrhosis trial that you mentioned, and I recognize that, in the coming weeks, you're going to be giving some updates, but just generally for the NASH lipid trial, could you just kind of highlight what would be the top goals you would hope to learn from this trial; and then for the cirrhosis trial, is it safe to assume that you would start this trial only after getting some regulatory clarity on what the acceptable endpoint would be?

[Mark E. Pruzanski:]

Yes, so with respect to the controlled trial, the NASH statin study; really the primary objective of course is to demonstrate prospectively the ability of standard statin use in this patient population to manage LDL effectively in combination with OCA, and of course, as you recall in the subgroup analyses post-hoc that we did with FLINT, there is certainly apparent evidence that that hypothesis is true. We're just going to show it in a much more robust way in this study. The second objective will be to rigorously study lipid metabolic effects of OCA, looking at LDL and other lipid sub-fractions and other signals. With respect to the cirrhosis study, yes, this is a very important study in our program. Obviously, REGENERATE addresses a very high unmet need in the population of NASH patients with advanced fibrosis, but those are the pre-cirrhotic patients. The highest unmet need of course will be in the cirrhotic patients, and we're committed to studying OCA in that population. So, we'll -- again, stay tuned for additional detail that we will absolutely be talking to FDA about the study.

[Jonathan M. Eckard:]

Great. Thank you very much.

[Operator:]

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

[Ying Huang:]

Hi, good morning. Thanks for taking my questions. So, first of all, can you talk a little bit about the FLINT subgroup analysis? In the U.S. patients, did you see that most of fibrosis improvement was derived from the patients with diabetes or not, and how does that compare to the Japanese trial?

[Mark E. Pruzanski:]

So, thanks for the question. I think I understood it to be what did we see in the subgroup of patients with diabetes. And the answer is we did present this subgroup analyses last year at the AASLD Symposium and then additionally at EASL, showing that in patients with diabetes and FLINT, the Western NASH patients, we did appear to have an even more robust signal with respect to histologic improvement, including fibrosis. And again, with respect to the Japanese study, different patient characteristics in that study population and just impossible to compare it to the Western NASH population that we've studied previously.

[Rachel L. McMinn:]

So, Ying, I would just -- it's Rachel -- I would just throw in an extra comment on the Sumitomo Dainippon Pharma study. Just remember that there are fewer diabetics in that study. In addition, a number of baseline characteristics that are wrapped up in that whole metabolic profile are quite distinct. So the patients in that study had a lower BMI, lower rates of hypertension, higher rates of dyslipidemia, and as I mentioned, lower rates of diabetes, and perhaps even the type of diabetes might be slightly different in a Japanese population. So I think, as Mark said, it's very difficult to compare, but the numbers of patients in each arm that would have diabetes are going to be relatively small and difficult to draw conclusions on.

[Ying Huang:]

Okay; thanks. And then I have a follow-up on the REGENERATE trial. I know you just started the enrollment in September. But based on your experience, can you talk a little bit about enrollment in terms of how many patients you can enroll and when do you expect to close their enrollment for the first 1,400 patients? Thank you.

[Mark E. Pruzanski:]

Yes. Obviously, with 1,400 patients, we are being very aggressive with this study globally. We will be going to up to 300 sites around the world. It's too early; we don't have enough visibility right now, so it's too early for me to comment specifically on enrollment timeframe, however.

[Operator:]

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

[Liisa A. Bayko:]

(28

[Mark E. Pruzanski:]

Sorry, Liisa, we...

[Lisa Bright:]

So, yes, Liisa, thank you very much for your question. I mean, we are going to have a quite extensive event on the 1st of December, where we're actually going to spend quite a lot of time taking you through our commercial structure and all the work that we've done to date. So I'm going to just defer that question until we meet at the beginning of December.

[Liisa A. Bayko:]

All right; fair enough; thank you.

[Operator:]

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

[Joseph P. Schwartz:]

Thank you very much. So, I heard you mention that you've been very engaged with the FDA throughout the review process for PBC. So, I was wondering, how that has been going relative to all of the extensive work that you did with Supergroup analyses et cetera. Have your interactions essentially flowed directly from that? Has there been anything that you think indicates that things have evolved at all since you've done that work as we head towards the PDUFA?

[Mark E. Pruzanski:]

Yes, look, we don't comment on specific regulatory interactions. However, what I'll say is that we have a very good working relationship with the GI division that is reviewing our NDA with respect to the – and there are a number of areas that we're interacting on of course. The Supergroup data, the Global PBC Study Group, certainly does provide very compelling evidence in a database of over 6,000 PBC patients with respect to the surrogate endpoint, alkaline phosphatase and bilirubin predicting clinical outcomes, liver transplant-free survival to be specific. So we are very confident in the robustness of the data supporting the endpoint. And then remember, of course there is also another big database (30

[Joseph P. Schwartz:]

And will you be able to use any of that material as you hopefully get approved and try to address the patients that need OCA beyond what they've had available for the last 20 years? Are you able to use any of that information? Is any of that available to you? Do you have other proprietary databases that you're working on?

[Mark E. Pruzanski:]

Well, yes, no, absolutely. I mean both databases are published now, and highlight the extensive unmet need in the PBC population. And basically the word back from the data is lower is better, with respect to alkaline phosphatase, same is true of course of bilirubin and the surprising finding was that bilirubin, even within the normal range, that lower was better. So, I think it is very robust in highlighting the unmet need in the population.

[Joseph P. Schwartz:]

Thanks for taking my questions.

[Mark E. Pruzanski:]

Thanks, Joe.

[Operator:]

Our next question comes from Danielle Brill (31

[Unknown Speaker:]

Hi, thanks for taking my questions, I'm in for Alan. I was just curious if you have any guidance on the biliary atresia trial, when you expect a readout for that?

[Mark E. Pruzanski:]

Thanks for the question. No, it's too early. We literally just are getting it underway, and so it's too early, we've been in a number of studies that have recently gotten underway and will be getting underway, so no visibility. I just want to highlight that this is an ultra-rare disease. It's a pediatric disease, and, so there really aren't that many patients out there.

[Unknown Speaker:]

Great. Thank you.

[Operator:]

At this time, I'm showing no further questions. I would like to turn the call back over to Mr. Mark Pruzanski, CEO, for closing remarks.

[Mark E. Pruzanski:]

Great. I just want to thank everyone listening in today for your interest and we look forward to interacting with you, those of you, as of the, who can be at our event on Monday, November 16. Thank you.

[Operator:]

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