Intercept Pharmaceuticals, Inc.
Q4 2014 Earnings Call Transcript

Published: 2 Mar 2015

[Operator:]

Thank you for joining the Intercept Pharmaceuticals’ 2014 Financial Results and Business Update 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 taped 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 year ended December 31, 2014 and we will also be providing an update on our development programs. 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.

[Dr. Mark Pruzanski:]

Thanks, Senthil and thanks everyone for joining us on our conference call and webcast. I am going to provide you with an 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. Let me start off by saying that we are very excited about the progress we made in 2014. It is an important year for our PBC program with positive Phase 3 data from the POISE trial in March, FDA granting us fast-track status in May, the global PBC study group publication supporting our surrogate endpoint in December and really productive discussions with the regulators throughout the year that culminated in the successful pre-NDA meeting with FDA. This set the stage prior to year end for the initiation of our Phase 3b confirmatory clinical outcomes trial in PBC and starting our rolling NDA submission under the accelerated approval pathway. Both of these important milestones and our goal to bring OCA to market is the first novel treatment alternative in almost 20 years for PBC patients with inadequately controlled disease. We continue to look to 2016 as our U.S. and European launch year. To that end, you may have seen we recently announced the appointment of Lisa Bright as Chief Commercial and Corporate Affairs Officer. Lisa brings more than 25 years of industry experience and most recently comes from Gilead, where she led the Sovaldi launch in Europe for hepatitis C. We are excited to have Lisa take on this role and are already seeing a positive impact on the business as we prepare for our anticipated commercial launch in PBC and lay the foundation for NASH and other indications. Of course, speaking of NASH, 2014 was also a transformative year for OCA and the company as a whole based on the earlier than expected readout of the FLINT trial conducted by the NIDDK at the National Institutes of Health. The publication in the FLINT trial results in November was followed by the timely transfer to us of their IND, which allowed us to quickly move to apply for breakthrough designation in December. We also received the comprehensive FLINT datasets, which allowed us to do a very detailed subgroup analysis of the trial results helping us gain a better understanding of OCA’s safety and efficacy profile in the NASH population study, while better informing the design of our upcoming Phase 3 program. Our accomplishments last year have laid the foundation for a very exciting year ahead for the company, in which we have continued to work hard at establishing Intercept as the leader addressing the huge unmet need of many millions of patients worldwide with neglected chronic liver disease. Looking ahead in our PBC program, we are on target to complete our filings for marketing approval for OCA in the U.S. and Europe in the second quarter. In addition, this year we will be completing our transition from a development stage to fully integrated commercial company with the plan to be ready to launch OCA in the U.S. and key European countries next year. To this end, we are building up a global Medical Affairs team and continued to expand our commercial infrastructure in the U.S. and Europe. We are also investing in our drug supply chain to support both the PBC launch and the much greater supply needs projected for planned OCA label expansions for the treatment of NASH with fibrosis and other indications. Turning to our NASH program we were thrilled that after review of the safety and efficacy data from our initial 6 week Phase 2 trial in diabetic fatty liver patients and the 72 week Phase 2b FLINT NASH trial, FDA designated OCA as a breakthrough therapy in NASH with liver fibrosis. This designation underscores FDA’s recognition of the urgent need to bring novel treatments to NASH patients who have developed liver fibrosis, a population estimated at more than 14 million people in the U.S. alone that is expected to make this serious disease the leading cause for liver transplant in just the next few years. We are grateful for FDA’s strong interest in advancing novel therapies for this disease and the additional momentum it gives us as we work on finalizing our Phase 3 program. We continued to project getting to a final Phase 3 protocol in the second quarter this year pending our reaching consensus on this global program with regulators in both the U.S. and Europe. Another important development is the two abstracts we have recently submitted have been accepted for presentation on March 20 at the AASLD Colloquium in North Carolina. Both abstracts are new subgroup analyses of the FLINT trial data we performed following receipt of the full data sets last year and provide important new insights on the efficacy and safety of OCA and NASH patients. One abstract is focused on the histologic improvements associated with OCA treatment in the designated breakthrough population of NASH patients with fibrosis who had higher risk of progression to cirrhosis. The second is focused on the impact of OCA on key cardiometabolic safety parameters and provides subgroup analyses showing the impact on LDL cholesterol of concomitant statin use in patients receiving OCA. We are excited to share these new data with the medical community since these important analyses were not included in the original Lancet publication. Additionally we will host an analyst event at the colloquium on the evening of March 20 to give analysts and investors the opportunity to discuss the detailed results with us. After we have the Phase 3 NASH trial underway we plan to start a separate Phase 2 NASH lipid trial later this year. The goals of this trial are to characterize the lipid metabolic effects of OCA and to carefully assess the ability of statins to mange the LDL cholesterol change observed with OCA treatment in the NASH population. Finally, we expect results from the Japanese Phase 2 NASH trail being conducted by our partners Sumitomo Dainippon by the end of this year. As a reminder this was a 200 patient trial similar in design to FLINT but assessing three doses of OCA 10 milligram, 20 milligram and 40 milligram daily versus placebo in Japanese NASH patients. Of course we intend to fully elucidate and explore OCA’s potential as the novel FXR agonist by pursuing an additional set of priority chronic liver disease indications beyond PBC and NASH. So in addition to an international Phase 2 trial in patients with PSC, Primary Sclerosing Cholangitis that is currently enrolling, later this year we plan to initiate a Phase 2 trial in biliary atresia, a very rare but devastating pediatric cholestatic liver disease. Looking even further ahead we also intend to collaborate closely with the hepatology community to design and conduct trials of OCA and other indications where there is great unmet need. With that I would like to close my prepared remarks with our key corporate objectives for this year which are; One, setting the stage for a successful PBC launch; Two, advancing our pivotal Phase 3 NASH program; Three, developing our product pipeline; And four continuing to attract the best talent as we build our infrastructure in the U.S. and Europe to support continued progress. I want to thank the entire Intercept team including all of our employees the physicians and patients participating in our trials worldwide consultants and vendors we work with and of course our investors who make our work possible for their collective dedication and support during this transformational period for the company. Thank you. And Barbara I will hand it over to you.

[Barbara Duncan:]

Thank you. Good morning everyone, please refer to our press release issued earlier today for a summary of our financial results for the period ended December 31, 2014. We ended the year with $240 million of cash, cash equivalents and investment securities available for sale on our balance sheet or approximately $431 million on a pro forma basis for the $191 million of net proceeds we have received from the equity offering we completed in February 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. These expenses will support the clinical development programs OCA in PBC, NASH in PSC, expansion of our clinical, regulatory, medical affairs and commercial infrastructure in the United States 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. Therefore, our current cash resources are adequate to not only fund us through the important milestones in 2015 that Mark just highlighted but sets us up for our anticipated 2016 PBC launch. Our detailed financial results are contained in our press release issued this morning. Our 2014 non-GAAP adjusted operating expense was approximately $92 million. This amount excludes the non-cash warrant revaluation expense of $171 million and non-cash stock-based compensation expense of $29 million. In relation to the warrant reevaluation expense, 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 income or loss. This amount included in our – this amount including our $283 million 2014 net loss was a non-cash item as Intercept was not required to spend any cash to settle the warrant liability. 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 9 AM.

[Operator:]

Thank you. [Operator Instructions] And the first question is from Michael Yee of RBC Capital Markets. Your line is now open. Hi, Michael, please check to see if your line is on mute.

[Michael Yee:]

Can you hear me okay?

[Operator:]

Yes.

[Michael Yee:]

Okay, great. Just two quick ones, one was can you give us a quick update on the PBC filing, your two studies that you had to finish to complete the necessary steps to complete the filing, how you guys feel about that and where the status is on that? And then secondly can you just confirm that you are sort of well into conversations both in Europe and U.S. with the Phase 3 design? I guess, what would be the one or two sort of last things you are trying to figure out with regulators before we are green lights on Phase 3? Thanks.

[Dr. Mark Pruzanski:]

Thanks for the question, Mike. So, with respect to the PBC Phase 1, just to remind everybody last year we let everyone know that we have been asked by the regulators to do these two additional Phase 1s, a biocomparability study and ADME, greater label ADME study. Both of those studies, in fact all clinical and non-clinical supporting studies for the NDA and MAA have now been completed on schedule. No news is good news. And right now, it’s just a question of continuing to execute on the completion of those filings in the second quarter as I mentioned in my prepared remarks. With respect to the NASH Phase 3, we are in an active dialog right now with the regulators. Of course, the breakthrough designation really helped elevate this program within FDA. And so the interactions are very constructive and ongoing. And we, as I mentioned, are guiding to completion of the final protocol for the Phase 3 program pursuant to discussions with regulators in both the U.S. and Europe in the second quarter and then we are going to hit the ground running with the program.

[Michael Yee:]

Okay, perfect. Thank you so much.

[Operator:]

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

[Ellie Merle:]

Hi, this is Ellie on for Alethia. Thanks for taking our questions. So, as you guys have had more time to analyze the split data in-house, how are the details helping to inform the NASH statin study design?

[Dr. Mark Pruzanski:]

I am actually going to ask Rachel McMinn, our Chief Business and Strategy Officer sitting beside me to take that question.

[Rachel McMinn:]

Yes, it’s a good question. At this point, we haven’t released data from the FLINT sub-analyses or gone into many specifics on the statin design. So, I think it’s probably better to have a more robust discussion on that topic on or after March 20 when the data come out, but we, as Mark said, we are excited to present these data and feel good about the overall profile of OCA.

[Ellie Merle:]

Okay, thanks. And just a quick follow-up, how do you think the FDA and EMA are going to go about sort of formalizing a definition for NASH resolution or clearance? Do you think there will be different definitions that will be applied across the different NASH assets that come along?

[Dr. Mark Pruzanski:]

Yes. Well, you raised a very good point, which is that there is no standardized definition right now from a pathologic standpoint of what NASH resolution looks like or needs to look like on a slide. And as you know, it was defined differently in FLINT by the NASH CRN as compared to let’s say Genfit with its upcoming dataset. FDA is well aware of this and we are part of our active discussion right now is exactly that how exactly should NASH resolution be defined? With respect to your question about it being different? It’s too early to tell, but I can tell you that there will be one standard definition we believe that will be set as a precedent and apply to all companies that are pursuing this indication going forward.

[Ellie Merle:]

Okay, great. That’s helpful. Thanks.

[Operator:]

Thank you. And the next question is from Akiva Felt of Oppenheimer. Your line is open.

[Akiva Felt:]

Hi, good morning. Thanks for taking the questions. Just wondering if the new subgroup analyses that are coming at the AASLD colloquium, were these shared with FDA as part of the breakthrough therapy designation application? And also do you have additional FLINT subgroup analyses beyond the two that you are going to present in March at the EASL conference? Thanks.

[Dr. Mark Pruzanski:]

Thanks, Akiva. So, the answer to your first question is no. FDA reviewed exactly what is available right now to you in reading the Lancet publication. And so, the answer is no. Second, with respect to EASL and frankly AASLD, what we have said before is that these two meetings of course are meetings that we would be interested in targeting this year for dissemination of additional subgroup analyses, but it’s premature to comment on what’s going to show up at those meetings. We are excited, as I mentioned in my remarks, about the two abstracts being accepted at the colloquium. They are currently under embargo, but I hope that you can make it on the 20th and see what we have to share there.

[Akiva Felt:]

Thank you, Mark.

[Dr. Mark Pruzanski:]

And just one final point, I should say that those abstracts are based on subgroup analyses that we have done and you had also asked, yes, we have done additional subgroup analyses. There is a lot of data there to mine.

[Operator:]

Thank you. The next question is from Ian Somaiya of Nomura. Your line is open.

[Unidentified Analyst:]

Hi, good morning, everyone. Thank you. It’s Matthew on for Ian. Just quickly if I may, I just was wondering if you might be able to give us some thoughts about at least how you are thinking around both cholesterol management strategy in the upcoming Phase 3 as well as I think you have alluded to at different points potentially dose adjustments to help with pruritus. And I was just wondering if you could maybe give some color on your thinking on that one as well? Thank you.

[Dr. Mark Pruzanski:]

Yes, sure. First thing with respect to cholesterol management in Phase 3 is that we will do it. It was not something that was done in FLINT. It was not anticipated in FLINT. And as you know, there is sort of an adjustment midcourse where actually primary care was advised to pay attention to cholesterol changes and that resulted in some patients being managed, but certainly not all. So, I am not going to get into the details of how we are going to do it, but frankly, as you probably know, most if not all of these NASH patients under current U.S. guidelines at least ought to be on a statin to manage their dyslipidemia and the literature clearly supports the fact that statin use improves outcomes – cardiovascular outcomes and also lowers liver enzymes in these patients. So, statins really are indicated for use in this population. And we expect as I have said many times before, we expect to be able to show that appropriate statin use will be able to manage the cholesterol effects of OCA in a large number of these patients. With respect to the second part of your question, dose adjustment to manage pruritus, yes, we used a lower dose and titration in our Phase 3 PBC trial to great effect in showing that pruritus is clearly dose dependent and can be managed in that manner. As I have said before we intend to study not just the 25 milligram dose that has been showing to be effective in FLINT but also a lower 10 milligram dose in Phase 3 and our hypothesis going in is that we will be able to show better management of pruritus.

[Barbara Duncan:]

I would just like to add just one other point of detail in case you haven’t seen the PBC Phase 2 publication in gastroenterology. And let me just talk in through a little bit of the data and then I will kind of come back with the conclusion. But in that Phase 2 study 10 milligram was as effective as 25 milligram and 50 milligram, so no improvement in efficacy but there was a dose dependent increase in pruritus. Because of that data that led the team to then use 10 milligram as the highest dose in PBC and actually investigate a 5 milligram and 10 milligram titration group. And about a half of the patients in the Phase 3 POISE program were well – met the primary endpoint on 5 milligrams alone. So, that’s to give you the stage for PBC. Now the dosing in NASH is obviously different, but the first dose that was tested was 25 milligram there has not been any dose escalation and we can’t say with confidence that lower doses would work, but at least gives you a sense of what we saw in PBC and that there is some rationale to expect a lower pruritus rate with lower dosing and obviously efficacy would need to be established in the Phase 3 setting.

[Unidentified Analyst:]

Okay. Thank you very much.

[Operator:]

Thank you. And the next question is Ying Huang of Bank of America. Your line is open.

[Ying Huang:]

Good morning. Thanks for taking my question as well. So first of all, Mark can tell us when you are going to have the end of Phase 2 meeting. And also do you think FDA want to see not worsening of the fibrosis or actually potentially a reverse of fibrosis as the endpoint in Phase 3 or part of the endpoint. And then secondly I am curious about your thought on the competitive landscape in NASH because we knew that Gilead recently bought a program from the German company called Phenex and then Merck also signed a collaboration with NGM, so I was wondering where the competitive strength you have and what do you think this will evolve? Thank you.

[Dr. Mark Pruzanski:]

Yes. Thanks for the question Ying. And I guess the start – the first part of the question with respect to – yes so we don’t as you know we don’t comment on any specific meeting with FDA. I mean with a program of this scope and size there are multiple interactions with the agency as you know we got breakthrough designation and a part of breakthrough designation is type B meeting, but again we have multiple interactions. And suffice to say that we reiterated our guidance now that we expect to get to final protocol in the second quarter of this year. With respect to fibrosis and no worsening which was mentioned in the hepatology publication of the proceedings of the 2013 endpoints workshop, as I have been saying before based on the result in FLINT we have raised the bar out there. And FDA has now very specifically designated the breakthrough population as NASH patients with fibrosis. And that reflects a recognition by FDA that its fibrosis that by far in a way correlates with bad outcomes both liver and non-liver related outcomes and is the important feature of NASH to focus on. So we have often said that we intend in Phase 3 to showcase the anti-fibrotic benefit of OCA as well as the benefit on improvement in other features of steatohepatitis. So it’s premature to really talk about what specifically the endpoint is going to be. But I think you can read the tea leaves in FDA’s designation for what FDA is going to want to see from future therapies at least in the break through population. With respect to the competitive landscape you are right there has been activity you have mentioned Gilead first and frankly first point there is that this represents additional validation of FXR as the target. Of course their program is a non-bile acid program and pretty early preclinical, so we will just have to watch and wait over time to see how they advance that program. There are of course other drugs out there, other mechanisms you mentioned NGM there is also Genfit and others. And frankly, from our standpoint, if you think about this, this is such an enormous disease population, such a heterogeneous disease that just as has been the case in other analogous diseases. Over time, you see multiple different approaches, different mechanisms with drugs that find very important places in armamentarium of treatment including eventual regimens that emerge in harder to treat sub-populations of patients. And we predict that the same will occur in NASH, while at the same time, two important points about our program. First, we are in the lead and we intend to maintain the lead. Second, OCA is the first-in-class FXR agonist and is promising as other approaches appear to be. Time will tell with the Phase 2 data. We believe that as an FXR agonist, we really have an optimal approach to treat NASH patients with fibrosis.

[Ying Huang:]

Thanks.

[Operator:]

Thank you. The next question is from Alan Carr of Needham. Your line is open.

[Alan Carr:]

Hi. Thanks for taking my questions. Alright, I guess, can you comment quickly on alignment between EMA and FDA and then also can you – in terms of NASH. And then also can you comment on the status of the PSC trial that you just started and then any updates on 767? Thanks.

[Dr. Mark Pruzanski:]

Thanks Alan. With respect to the first part of your question alignment between EMA and FDA, what I can tell you is that the momentum generated by the NASH endpoints workshop in 2013 hosted by the FDA resulted in the formation of something called the Liver Forum, which is a formal gathering that includes EMA, and of course industry sponsors pursuing NASH and academic thought leaders, and the kickoff meeting for that was at AASLD this past November, EMA was represented there. So, there is alignment in as much as the regulators are thinking together about registration paths in this disease population. And clearly, there is interest just as there is interest on the part of FDA there is clearly interest on the part of EMA in the disease and the unmet needs in advancing therapeutics. With respect to PSC and 767, so we just initiated the PSC study in December of this past year. It’s too early to comment on enrollment. This is going to be – this is an international study. We are targeting enrollment of 75 patients and we will give you an update on as – later on as the trial ramps up. 767, our guidance, thanks for reminding me, we didn’t – I didn’t reiterate it, but our guidance is that we will be getting 767 into Phase 1 by year end of this year. We continue to be very excited about this compound just to remind everybody this is approximately three-fold more potent on FXR than OCA. And in every single animal model of fibrosis and chronic disease in liver, intestine and kidney, 767 has looked superior to OCA head-to-head, so that hence our excitement.

[Alan Carr:]

Great. Thanks very much.

[Operator:]

Thank you. We have time for one more question. The question is from Jim Molloy of Summer Street. Your line is open.

[Jim Molloy:]

Hey, guys. Thanks for taking my question. Just a quick follow-up, the breakthrough designation that you got, how does that – how does that change your interaction so far and does that impact the Japan data and ability to maybe use that in the U.S. filing in anyway?

[Dr. Mark Pruzanski:]

I think you ask that each time Jim. Look the breakthrough, I think, it’s obviously tremendously exciting for us. I think it was also very exciting for the gastroenterology division and within FDA generally as far as we know this is the largest ever population designated breakthrough. And of course there is an unprecedented regulatory path here. So the program has been elevated internally to senior leadership involvement with FDA, which is typical in a breakthrough designation. It certainly means that as good and constructive as our interaction and working relationship has been with the GI division, it elevates it that much more with really in a very frequent interactions with the division. And just to remind you, this is the same division, exact same people reviewing our PBC program, so they know us well, they know OCA at this point quite well as well. So with respect to the Japanese data, this is – thanks for reminding me, this is SBT’s data expected by around year end. The answer is no, again, the breakthrough designation doesn’t change our expectation of, first of all, of course leading to do the Phase 3, but second, more importantly on the fact that the first opportunity for getting this drug approved and the label expanded for NASH patients with fibrosis will be based on results from – interim results from this Phase 3 program. I think it’s appropriate to do FLINT and the Japanese trial as important, but supportive Phase 2 studies and it will be interesting to see, for example, what impact if any there is from the different doses to see if there is a dose-ranging effect in the Japanese data because of the 10, 20, 40 milligram dose selection.

[Jim Molloy:]

Great, thanks for taking the question.

[Dr. Mark Pruzanski:]

Thanks and thanks everybody again for listening today. We appreciate your support. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Good day.