ICPT (2019 - Q2)

Good morning ladies and gentlemen, and thank you for joining the Intercept Pharmaceuticals' Second Quarter 2019 Financial Results Conference Call. All participants are now in a listen-only mode.Following opening remarks, Intercept's 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 approximately two weeks.I would now like to introduce Justine O'Malley, Vice President, Corporate Affairs. Please go ahead. Justine

Thank you, operator. Good morning and thank you for joining us on today's call. This morning we issued a press release announcing our second quarter 2019 financial results, which is available on our website at www.interceptpharma.com.Before we begin our discussion, I'd like to note that during our call we will be making certain forward-looking statements, including statements regarding our approved products and clinical development programs, the, timing and potential acceptance of our regulatory filings, the target product profile, potential approval, launch and commercial success of our product candidates including OCA for NASH and our strategy, prospects, financial guidance and future commercial and financial performance.Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call and we undertake no obligation to update such statements except as required by law.These forward-looking statements are based on estimates and assumptions that although believe to be reasonable are inherently uncertain and subject to a number of risks and uncertainties.Some, but not necessarily, all of the factors that could cause our actual results to differ materially from our historical results or those anticipated or predicted by our forward-looking statements are discussed in this morning's press release and in our periodic filings with the SEC.Today's call, we will begin with prepared remarks from our CEO, Dr. Mark Pruzanski, followed by those from our Chief Operating Officer, Jerry Durso and our Chief Financial Officer, Sandip Kapadia. We'll then open the call up to take your questions.Let me now turn the call over to our CEO, Dr. Mark Pruzanski.

Thanks, Justine and good morning everyone. Thank you for joining us on our second quarter 2019 conference call. As we announced in our press release this morning, we had a strong second quarter with our team delivering substantial demand in revenue growth in the PBC business.We’ve also continued to make great progress preparing for our planned NASH launch next year, while further bolstering our industry-leading Phase 3 development program.Based on the great momentum we’ve seen, we announced that we exceeded target enrollment in the outcomes portion of the REGENERATE study, while remaining on track to complete enrollment of the expanded REVERSE study later this year with to-date approximately 3,000 patients enrolled between the two studies.In support of these activities, we executed a successful financing that netted the company a little more than $450 million in proceeds greatly strengthening our balance sheet.With respect to our second quarter results in the PBC business, I am really pleased to note our commercial team’s continued outstanding execution resulting in $65.9 million in Ocaliva net sales worldwide representing 53% growth versus the prior year’s second quarter.Coinciding with this performance is the positive feedback we’ve been receiving from hepatologists and a growing group of community gastroenterologists, who have been prescribing Ocaliva to their PBC patients and seeing its benefits.We’ve developed an excellent understanding of these liver disease specialists while continually honing our commercial expertise marketing Ocaliva in the U.S. and our other target markets where we are approved internationally.This positions us very well for a successful first-to-market specialty launch in NASH where we will again target our core customer base of hepatologists and gastroenterologists.Turning to our NASH pre-launch effort, these are now well underway with great progress made over the quarter on a number of fronts. Our team has been working to prepare for regulatory filings in the coming months and we remain on track to submit our NDA to the FDA later this quarter followed by our MAA filing in the EU in the fourth quarter.In connection with our launch preparations in NASH, we continue to have very productive interactions with physicians, payers and patient groups. These key stakeholders recognize the critical importance of the therapy within anti-fibrotic benefit underscoring what we believe to be a key competitive advantage of OCA. If approved, we expect OCA will become the first and over time, an essential therapy in NASH patients with advanced fibrosis.We firmly believe that NASH is a blockbuster opportunity for us and that we will be able to realize this by driving a successful specialty launch that leverages our strong commercial foundation. We look forward to presenting our launch and commercialization plans at an investor event prior to approval.In addition to our ongoing NASH launch preparations, we continue to advance our industry-leading NASH development program. Today, I am pleased to announce that we’ve completed target enrollment of the outcomes cohort of the REGENERATE Phase 3 study with more than 2400 patients randomized. It’s by far the largest and most advanced study of its kind.To-date, OCA remains the only investigational NASH drug to have shown an unequivocal anti-fibrotic benefit in a large adequate and well-controlled Phase 3 study. Given what we have observed in the REGENERATE 18 month interim analysis with respect to fibrosis reversal and stabilization, we believe that OCA is well positioned to go on to confirm as therapeutic benefit on a post-marketing basis in the clinical outcomes portion of this study.We also expect to publish the primary results from REGENERATE and present additional important study data at upcoming scientific meetings such as the AASLD Liver Meeting in November. Important new contributions include anticipated abstracts, examining OCA’s effects on non-invasive measures of liver fibrosis and patient-reported outcomes that will provide important new clinical insights to healthcare providers.Today, we also announced recent changes we’ve made to drive even stronger confidence in the success of our ongoing Phase 3 REVERSE study of OCA in NASH patients with compensated cirrhosis. As a reminder, the primary endpoint in REVERSE is fibrosis improvement with no worsening of NASH identical to the endpoint OCA achieved in REGENERATE.With REVERSE now the only ongoing Phase 3 study in cirrhotic patients, and with the confirmation of OCA’s anti-fibrotic effect in REGENERATE earlier this year, we’ve seen tremendous investigator and patient enthusiasm at our close to 300 active sites worldwide and continued strong momentum in the enrollment of the study.Capitalizing on this momentum, we’ve decided to expand REVERSE to approximately 900 patients. Importantly, we are maintaining our guidance of completion of enrollment by year end. We are also extending the double-blind phase of this study from 12 to 18 months in order to align with REGENERATE.As recently reaffirmed by the FDA, we expect the successful readout of REVERSE to support our pursuit of an extension of the approved indication for OCA to the treatment of NASH patients with compensated cirrhosis. Such patients represent a very high unmet need being at particularly high risk of liver failure and we are uniquely positioned as the leader in this more advanced segment of the NASH patient population.To summarize, in the first half of 2019, we continued our strong momentum in our PBC business and initiated what’s been an incredible team effort preparing for our planned first-to-marketNASH launch next year. We are confident in the team we are building, our market preparation activities and the resources we have on hand to deliver a successful NASH launch.In the near-term, as we continue to prepare our upcoming regulatory filings, it’s inspiring for all of us here at Intercept to contemplate the opportunity ahead of us to help patients with advanced fibrosis due to this devastating disease.With that, I’ll turn it over now to Jerry for a more detailed update on our global commercial PBC business and our prelaunch activities. Jerry?

Thanks, Mark, and good morning, everyone. Quarter two was our strongest quarter to-date with regard t o our commercial performance. We reported $65.9 million in worldwide Ocaliva net sales representing 53% growth over the second quarter last year.In the U.S., we achieved net sales of $50.7 million and are pleased with our team’s execution of our commercial strategies which drove significant expansion of our PBC business. The work we’ve been doing to expand our physician reach and prescriber base in PBC has been successful. In fact, since January, about one-third of our new patient enrollments are coming from new prescribers.We continue to receive positive feedback from prescribers of Ocaliva. In our most recent quantitative market research, approximately 95% of the hepatologists and gastroenterologists were the most experienced prescribing Ocaliva reported a positive clinical experience with our product.Turning to the international region, we achieved ex-U.S. net sales of $15.2 million in the second quarter representing an increase of approximately 75% as compared to the second quarter of 2018. We believe the ex-U.S. growth we are seeing is a clear indicator that the team is executing well and our physicians are becoming more confident using Ocaliva in their PBC patients.As we look ahead to the remainder of 2019, I am confident in the capabilities of our team to drive momentum in our commercial PBC business.Now turning to NASH, as Mark mentioned, we’ve been rapidly progressing our launch preparations ahead of expected filings in the U.S. later this quarter and the EU in the fourth quarter. While we are making great progress domestically and abroad, today I am going to focus on our U.S. preparations as the U.S. is expected to be our first market to launch in NASH.As you might imagine, we have undertaken a significant amount of work to understand the evolving NASH landscape and have been conducting extensive qualitative and quantitative market research work with physicians, payers and patients to inform our strategies and our launch planning.One of the points that is evident is that while there is education required to develop this market, there are also substantial number of patients with advanced fibrosis due to NASH already identified in the specialty setting today even ahead of the therapeutic being available.The work we have done with physicians indicates that the greatest need for treatment is with those patients with advanced fibrosis due to NASH as these are the patients who are at the highest risk of progressing the cirrhosis. It’s clear based on our market research, that physicians remain focused on preventing progression of cirrhosis as a top treatment goal.In fact, in a research quantitative survey, over a 100 hepatologists and gastroenterologists, these specialists rated halting fibrosis as the most important efficacy attribute in the treatment of patients with advanced fibrosis due to NASH with over 80% deeming it very important.With OCA positioned to potentially be the first therapy approved that deliver the benefit in stabilizing and reversing the progression of fibrosis, this physician insight reinforces our confidence and our ability to successfully commercialize OCA and NASH.In fact, in the same research, after viewing OCA’s blinded target product profile, approximately three quarters of the specialists indicated they were definitely or very likely to prescribe such a product in their practice.We believe that early adoption will be higher among patients with more advanced fibrosis, given the greater risk of progression to cirrhosis. For example, close to two-thirds of the specialists poll indicated that their need to treat F3 patients was very urgent.Although certain of our market research data is based on the traditional fibrosis or F score framework, we believe the market is in transition away from this paradigm and moving instead towards a framework defined by early and advanced fibrosis.It is our view that this change is being driven by the growing acceptance of non-invasive tests. As we’ve stated previously, the majority of advanced fibrosis patients with NASH under treat or care have not had a biopsy as community physicians are generally identifying patients using non-invasive tests including imaging modalities and blood-based measurements and we do expect the use of these tests to continue to grow and gain widespread acceptance.In summary, our market insights confirm that there is significant number of patients with advanced fibrosis under the care of specialists today and a clear willingness to treat those patients with an anti-fibrotic therapy like OCA once approved and available in the market.Moving on to our payer interactions, we made good progress to-date as we continue to educate payers on the NASH disease states, the importance of treating advanced fibrosis and the best way to identify and monitor these patients. It’s important to note that our precise target population at launch will also depend on the results of our conversation with payers.Based on our market research and similar to what we’ve heard with physicians, payers have indicated that they view the prevention of cirrhosis and related complications as a key value driver and they generally agree that patients with advanced fibrosis have the greatest unmet need.When considering appropriate patient identification, our experience is that payers tend to align with current medical practice with physician sentiment moving away from the use of biopsy, we believe that payers recognize and will also support the evolution towards the greater use of non-invasive methods to diagnose patients with advanced fibrosis.We believe that we have a strong value proposition with OCA’s demonstrated fibrosis benefit and as we progress towards launch, we will be working together with payers regarding our target patient population, ensuring access and finalizing pricing. While we are planning for a specialty launch in NASH, understanding the perspectives of the patient’s real target at launch will also be critical.Accordingly, we’ve conducted additional market research including a recent survey of over a hundred patients already under the care of a specialist. Results show that close to two-thirds of these patients stated that they are very concerned about NASH and about 80% stated that they would be very likely to fill a prescription for a drug with OCA’s target profile if they receive one.Overall, we feel confident in the fibrosis benefit that OCA offers and our market research across physicians, payers and patients reinforces our belief that we are well positioned to successfully launch OCA if approved and bring the first therapy to patients with advanced fibrosis due to NASH.As Mark mentioned earlier, we look forward to sharing more in-depth market insights as we get close to the launch.From an operational perspective, we have great momentum as we are accelerating our launch readiness plans in anticipation of the approval of OCA for NASH. As we previously mentioned, we are preparing for a specialty launch focused on patients with advanced fibrosis due to NASH and plan to target approximately 15,000 hepatologists and gastroenterologists in the United States.Today for PBC, we cover about 5,000 of these physicians and have initiated our plans to increase our field-base teams to ensure coverage at launch, while bolstering our home office support functions to effectively serve the business.For example, we’ve already completed the expansion of our medical affairs team. We have strengthened our access teams and are actively engaging with payers. We are hiring additional leadership in our sales organization and we’ll build out the sales force in a stage gated manner in accordance with our launch plans as we move closer to the potential approval of OCA for NASH.Our expanded medical affairs team is already hard at work educating specialists in connection with the rollout of our NASH disease education campaign. I feel confident in our launch plans and our ability to continue to execute as we move closer to the expected approval of OCA and NASH.We are poised to build on our strong PBC business and are excited about the prospect of driving the successful first-to-market launch in NASH where we believe we have the people, the skills and the capabilities to accomplish our goals.And now I will turn the call over to our Chief Financial Officer, Sandip Kapadia for a financial update. Sandip?

Thank you, Jerry and good morning everyone. Please refer to our press release issued earlier today for a full summary of our financial results for the quarter ended June 30, 2019.Q2 was an important quarter for us. We successfully raised approximately $450.6 million in net proceeds in our financing transaction. We also saw very strong volume growth versus the prior year quarter in our PBC business, as well as made important investments to strengthen our clinical development program, prepare for our NASH filing, and fund our launch activities.In the second quarter, we recognized $66.3 million in total revenues, up from $43.6 million in the second quarter of 2018, a growth of 52% versus the prior year quarter.Our second quarter Ocaliva net sales were comprised of U.S. net sales of $30.7 million and ex-U.S. net sales of $15.2 million. We continue to have strong demand growth in the U.S. though we did a fair specialty pharmacy orders outpacing prescription trends during the quarter. This was generally in line with our expectations, but we would expect that to normalize as we go forward.Total gross to net for the quarter were towards the lower-end of our previously communicated 10% to 15% range. Our GAAP operating expenses for the quarter were $130 million and non-GAAP adjusted operating expenses were $113 million. As a reminder, our non-GAAP adjusted operating expenses exclude stock-based compensation, depreciation and amortization.Our cost of sales for the second quarter were $0.7 million, and was consistent with prior year quarter. Our selling, general and administrative expenses for the quarter were $69.7 million. This was an increase of $4.5 million over the prior year quarter and was driven primarily by increases related to our NASH launch preparation activities.Our research and development expenses for the second quarter were $59.6 million. This was an increase of $12.2 million over the prior year quarter. The increase was primarily driven by cost associated with our NASH development program and the preparation of our NASH NDA submission.As of June 30, 2019, we had cash, cash equivalents, and investments in debt securities available for sale of approximately $758.5 million. As mentioned previously, this includes $450.6 million in net proceeds from our public offering, concurrent private placement of our common stock and issuance of the convertible notes in May of 2019.Moving to our financial guidance. 2019 continues to be a critical year as we build momentum in our PBC business, while deploying resources to support our NASH regulatory filing efforts and launch activities. We continue to be confident in the demand for Ocaliva and the financial outlook for the remainder of 2019.As mentioned earlier, we do expect to see the normalization of specialty pharmacy orders and seasonal effects in Q3 followed by stronger Q4. As a result, we are reiterating our previously announced 2019 Ocaliva net sales guidance of between $235 million to $245 million. Given the strong performance, we now expect to be in the upper-end of this range. We continue to expect gross to net for the year to be in the 10% to 15% range.In addition, we are reiterating our 2019 non-GAAP adjusted operating expense range between $470 million to $500 million.In summary, we are in a very strong cash position, have good momentum in our PBC business and are making solid progress advancing our regulatory filing, and making important investment decisions to strengthen the clinical development program and fund a successful NASH launch.Finally, as a reminder, non-GAAP adjusted operating expenses is a non-GAAP financial measure under SEC regulations. Please refer to our press release issued earlier this morning for an explanation and reconciliation of this measure.I'd like to now turn the call over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from the line of Michael Yee from Jefferies. Please go ahead.

Hey guys. Congrats on a strong quarter and the progress on your REGENERATE and REVERSE studies, that sounds great. I think that - I have two questions, both are related to the investment community’s thinking about the NASH launch next year and while appreciating, you guys will have more color on that as we get closer, I guess, my two questions are, one, how to think about the push, pull dynamics of a NASH launch versus a PBC launch.Obviously, one has significantly more patients, but would there be any differences in dynamics for example, biopsy confirmations, things of that nature that are different from PBC. So maybe just comment about the differences of a NASH launch versus PBC. And then, related to that, my other question is, you’ve already said that you have filed two different NDAs and expect to have two different NDC codes.Maybe just comment on your confidence about being able to do that and whether you feel good about that and whether payers are okay with indicating pricing? Thanks so much.

Mike, thanks for your questions. I’ll ask Jerry to take them.

Yes, Mike. Thanks for the questions. I guess, to start on the first one, we clearly believe that, we have a blockbuster opportunity here with NASH that we are going to unlock through the specialist launch as we said there are significant number of patients that are already identified today that are sitting with the specialists that we are going to target and of course most of these have been identified and recognized without a biopsy.I think that the – one of the key differences between PBC and NASH will be that we would expect the treatment rhythm with NASH to follow what you would typically see with a chronic condition or chronic medication and this would probably resonate in the launch where we would anticipate that physicians would see their NASH patients on the regular rhythm that we would.So that’s one of the main difference is where clearly in PBC the patients are very diffused across a pretty large treatment group of physicians. They tend to have a very low number of individual patients for physicians which would necessarily be the case in NASH where the general hepatologists and gastrologists will frankly have a larger group of NASH patients in their normal population.

And then the comment about biopsy, would that be required? Is that your base case? Would that have to have been within a certain timeframe or do you feel that it could be a lot more like PBC?

Yes. Okay. So, I’ll try to take a min in order – as we’ve indicated and as we continued to see from all the learnings that we are doing in the market, we do see a physician willingness to identify these patients without a biopsy. We also see a lot of momentum in the marketplace with some of the data emerging moving much more towards utilization of non-invasives in the clinical setting.We also know from the early discussions we’ve had from – with the payers that we know that payers prefer to align with medical practice. So, we do see them continuing to support the movement to work on non-invasives in an appropriate way. We also know that the exact patient population et cetera will be the result of the deep conversations that we are going to have with payers as we progress through towards launch and we’ll give you some more color on that as we get closer.And then, I think your third question, Mike was on pricing between potentially two different indications. We are, as we said before, pursuing a dual-branding strategy. We filed a separate NDA. This would give us an option to explore differential pricing if in fact we are successful of securing the second brand.But of course, as you would imagine, our final perspective on that is going to be based on some future work and discussions and dialogue with payers as we progress both through the regulatory process and ultimately with our discussions with those customers.

Okay. Thanks so much. I appreciate it guys.

Thanks, Mike.

Thank you. Our next question comes from Alethia Young from Cantor Fitzgerald. Please go ahead.

Hey guys. Thanks for taking my question. Congratulations on a very good quarter, as well and the progress that you’ve made finding patients et cetera, et cetera. Two, maybe, two, two-and-a-half questions for you here.One, I wanted to just talk a little bit about the REVERSE. What was the impetus behind the potential change in that population and along getting the trial, was it something from the FDA? Or was it something internal?Or was it kind of anything else that drove that? And then, my next question is, you’ve mentioned that, with your patient identification work, you’ve found a significant number of patients and while I’ll just ask going blank, can you quantify those for us today? If not, will you just kind of clarify whether it’s on the high or low or the same as how you estimate, maybe, let’s say a year ago for you began this exercise? Thanks.

Hey, Alethia, I’ll take the first question. So, with respect to REVERSE, we completely drove this. I’ve been saying for some time now that we’ve been looking since particularly the failure of seller floor that we are completely alone out there and in the lead and this is a really a huge unmet need and opportunity for us. So, we are looking for ways to go play on the study and that’s precisely what we’ve done capitalizing on the great enrollment momentum and enthusiasm we’ve seen worldwide for this study. And the fact that we can maintain our guidance of completion of enrollment by year end made this decision really a no brainer for us. So, this will, in the end be the largest ever NASH resist study.As I mentioned in my prepared remarks, I mean, just to signal how far in the lead we are in our development program between the two Phase 3s, we’ve got approximately 3,000 patients enrolled and we are now well into the outcomes portion of REGENERATE with that cohort fully target enrollment reach. So, we feel really good about our prospects with both studies.

Yes, Alethia, I’ll take the second part of your question. Yes, we are not going to go specifically into the patient populations today. That would be something I think we would definitely look forward to covering at a future time. I would say that, as we progressed over the past 12, 18, might be 24 months, it has been a deep exercise.It’s one of the opportunities we have as really the first company to go deep in this area that there is not exactly a clear map that existed. So this was really up to us to go in and do the deep work quantitatively primary work to finding.And I would say that over the past, again, 12 or 18 months, we’ve become more confident in the range of opportunities that we have and again, we would look forward towards sharing that at a later point.

Great. Thanks.

Thank you. Our next question comes from Brian Abrahams from RBC. Please go ahead.

Hi. Thanks for taking my questions and congrats on the quarter and all the progress. Two questions from me. Where are you guys with respect to analysis of translation of diagnostic data from patients screened in REGENERATE?Is this something we should be looking for at ASLD? And that could be part of the initial label or should we be thinking about this more as part of broader initiatives for elucidating non-invasive diagnostic potential?And then, separately on PBC, could you maybe quantify the extent to what’s that difference between specialty pharmacy orders and demand-based sales drove this quarter’s U.S. sales uptick? And what was the actual underlying quarter-over-quarter demand change? Thanks.

Thanks Brian. So, with respect to your first question, yes, we are doing a deep dive now in the REGENERATE and other data on non-invasives and as I mentioned in my prepared remarks, we are looking forward to presenting data from REGENERATE on the effects on OCA on various non-invasives both serologic and imaging that we believe what we know are already being used out there to the point Jerry made earlier to identify patients with advanced fibrosis.So, we will look forward to having the opportunity present have the additional data from REGENERATE at upcoming scientific meetings including ASLD. I have often said there is a treasure –data here. With respect to the second question, I’ll hand to Sandip.

Yes. Hi, Brian. Thanks. Thanks for the question. I mean, obviously, we had a very strong quarter and we are very pleased with the momentum both in the U.S. and ex-U.S. I mean, we have very strong underlying demand. I think the way to sort of think about the impact especially ours I mean, we have IMS data out there.So, we certainly can – still it continues to be a good indicator of underlying demand in the U.S. and this was in line with our expectations. We expect this to sort of normalize typically. We also obviously had some seasonal effects in Q3.But we certainly expect a very strong Q4. We continue to reiterate our guidance and as a matter of fact, at this point we expect to be at the upper-end of our range. Hopefully that gives you some background.

Thanks, Sandip and thanks, Mark.

Thank you. Our next question comes from Yasmeen Rahimi from Roth Capital Partners. Please go ahead.

Thanks. Thank you for the continued progress and the updates. Two questions for you both are directed to Jerry. So, can you kind of give us a little bit color on sort of NASH pricing? Specifically, what do you believe is the range of a NASH price that’s going to probably minimize the request by payers to have biopsy as a prior authorization?And then, maybe you can also educate us about what’s the current cost burden is on the healthcare system of F3 NASH patient versus an F2 NASH patient? Thank you.

Okay. So, maybe a little color on how we are thinking about the NASH price. Obviously, it’s premature to talk about specific pricing points. But it’s clear that NASH and PBC are very different diseases, different populations. All of the insight and the discussions that we are having with payers indicates that they are top goal.The way that they think about the value and the concern from them is around progression to cirrhosis and the fibrosis benefit that we saw and REGENERATE will be at the core of our value proposition. With NASH, the importance of the fibrosis end-points and the kind of data that we’ve been able to generate in REGENERATE will be important to them in that conversation.And we also believe clearly that the benefit, the fibrosis benefit will give us some strong differentiation in value from other drugs and other drug classes that are providing a more metabolic effect and of course, we are going to be focusing the launch as a specialty launch. We are fully engaged as you can imagine on this topic and we’ll look to communicate more the F3 not to go into specifics per se.But it’s clear the F3 patients are where the concern is. The payers recognize that the cost burden comes with the complication as patients get closer and ultimately progress to cirrhosis. So, although, again, we see the market moving over time away from the classic fibrosis stage framework and more towards kind of an early and advanced fibrosis as patients advance that concern and the cause around progression of cirrhosis is a factor. ‘And it’s why we continue to learn from the payers that their prioritization, their urgency is around those advanced patients and it’s where we believe we will have a real good productive discussion on all of the appropriate topics, price, identification of the right patients and again, our shared intention to get access to a drug that impacts fibrosis to these high risk patients who are ones that are at top of mind with payers.

And then, when do you plan on sharing the data that you have done internally in terms of the PRO work. Is that something we should be expecting to see at the upcoming liver meeting in Boston? Or is that more evil of act?

Yes, I think it’s – we will have important data to present at ASLD and at subsequent scientific meetings. So stay tuned for that. I think it’s premature to specify what’s going to be presented. But we’ve – I’ve talked before about the PRO data.The patient reported outcome data based on validated quality of life instruments as being really important to highlight the patient experience of taking our drug. So, stay tuned for that.

Thank you, team for taking my questions.

Thanks, Yas.

Thank you. Our next question comes from Brian Skorney from Baird. Please go ahead.

Hey, good morning guys. Thanks for taking the question. A little more on sort of the data that we are going to be seeing on non-invasive methods used in REGENERATE.Can you just review what made your non-invasive measures were utilized in the study? What you think are the most interesting potential surrogates for changes in liver histology? Were all patients in REGENERATE analyze with fiber scan and MRI TDFS and what intervals were those measurements utilized?

Yes, sure, Brian. Thanks for the question. So, the primary focus in terms of relevant data are non-invasives or what we call NITs, that are currently available point-of-care relatively inexpensive, easy to use that physicians are already using.So, starting there is a fair amount of literature now on this. But starting with very easy to calculate scores like for an APRI that are based on standard liver enzymes like ALT, AST, platelets and AH that’s the four APRI is AST and platelets is our very good first screens and with improving sensitivity specificity to identify patients with advanced fibrosis. .FibroScan, transient elastography is the other obvious one. It’s approved, reimbursed, point-of-care with a growing installed base in the U.S. and an extensive installed base in Europe. And there is a fair amount of literature on appropriate cut outs there to identify patients with advanced fibrosis. There are other tests that can be currently ordered in the U.S. like FibroSure.So, these are all things that we are primarily focused on. I want to note though and it should be obvious that, all of these are focused on fibrosis, right? And that's why we keep saying that commercially it’s so critically important for us to be in a position to launch a drug with a fibrosis benefit.This is not only associated with outcomes, but it’s where we’ve got a grab bag of already available non-invasives at the point-of-care that can be employed. The much higher lift as I’ve been saying constantly with the drug that ends up getting approved just on a so-called NASH resolution.

Great. Thanks, Mark.

Thanks, Brian.

Thank you. Our next question comes from Ritu Baral from Cowen. Please go ahead.

Hi guys. Thanks for taking the question. Maybe, we will start with your comment on how the – I guess, clinical definition of staging of NASH is moving from early and advanced and away from the F stages. Can you quantify that a little bit, like what, as the definition changes, what constitutes early NASH? What constitutes advanced NASH? And how does concept of high-risk cofactors like diabetes, et cetera sort of weigh into that?

Yes. Thanks, Ritu. Obviously, the field is evolving, as Jerry mentioned. And we are moving towards a non-invasive world. I mean, frankly, really the only reason NASH patients being or primary reason NASH patients being biopsied today is because in clinical development programs in Phase 2 and 3, it’s still required.But in the real world, as Jerry mentioned, based on our market research, we know that a majority of patients under treat or care are not receiving biopsies. And that’s why continuing to drive education and analysis around these non-invasives that I just mentioned is so critically important.We do think that the world is evolving away from that stage to your question to one where we’ll be categorizing patients with early or no fibrosis versus advanced fibrosis, versus cirrhosis.And the exact definition – what I can tell you is that, these are rooted in underlying fibrosis scaring in the liver. I think, over time, certainly, we will be able to identify risk factors like co-morbidity is that you mentioned, like diabetes.But what we know is that, fibrosis alone is clearly associated with the risk of outcomes and that’s where the focus really is for all stakeholders, for physicians, for payers and of course, ultimately for patients.

Got it. And then, we – actually Cowen had organized a meeting with the FDA recently where the SEDAR had mentioned exactly what you did that the world is moving to non-invasive and the implication was they love to see within a pivotal design, some sort of prospectively defined sub-analysis that would, at least in their minds validate non-invasives such that they could omit biopsy diagnose/NASH in a label.Can you talk about whether - you don’t have to go into the specifics, but are there prospectively defined analyses sets within REGENERATE that you will be discussing with FDA?

Well, we certainly pre-specified the use of the various non-invasives that I mentioned a few minutes ago. And as I have been saying, I mean, FDA is deeply interested in looking at the totality of data that we’ve got.We know, I mean, FDA is another key stakeholder here. They – to your point, they have said that, they ideally would like to move beyond box themselves in what they require in a clinical development program.So, I still think that that’s going to be a lagging indicator so to speak. It’s going to take a little while for them to get comfortable enough with non-invasive data being sufficiently validated to remove the need for biopsy development programs. But they certainly are very interested in working with us on this problem.

Got it. And a quick follow-up just on – can you give us some high-level color on the European market feedback on the NASH market? And how doctors view it?We’ve had some particularly challenging conversations and what’s usually the biggest market in Europe, Germany, from German doctors on NASH. How do they think about it? Can you talk about maybe the top-three markets? And how you plan to approach that sort of almost cultural perspective on the disease?

Yes, this is Jerry. So, we are making good progress in doing the similar kind of deep market analysis in the major European markets as we have in the U.S. Although the filing will be a little bit behind the U.S. and with all of the normal process in Europe around approval and then market access, we do expect the European markets to come later.I think the concept of there being a high – higher urgency to treat with the advanced population is frankly a consistent theme that we see coming back from the markets. Obviously, there is some differences in the structure of the markets when you look across in terms of some of the major countries in Europe where the treatment tends to be more focused in some of the key centers where you have a situation of – for example in Germany, where it is more of a broader treatment spread throughout a broader group of treaters.And again, we are deep in a similar process to we had in the U.S. in terms of defining what each of those markets looks like. And again, I would look forward to going into more details on that in the future as we progress. Good progress there, but obviously, the initial focus for us has been on ensuring all things are lined up with our first market to launch which will be the U.S.

And the only thing I would add, Ritu, is, I am well aware of the sort of almost cultural conservatism that you are alluding to with some of the docs there. Really, I think you diplomatically pointed to stigma that these patients sometimes face, the same was true I’d point out with hepatitis C , long time ago and clearly changed over time.What is abundantly clear is that the unmet need represented by NASH with advanced fibrosis in Europe is just as urgent and pressing, no matter where you are there in Germany, UK, France, clearly, this is – there is a pressing need there. And we are very confident in the opportunity in those countries and the fact that docs will be willing to prescribe.There is probably even more. This is a qualitative comment, probably even more of an emphasis on an anti-fibrotic benefit as necessary to support the value proposition for a NASH drug. As you know, right now, the EMA Reflection Paper requires either a drug to hit on both the current rate upon primary endpoints or if it’s fibrosis, then to be further supported by two-stage improvement, which is why we believe again, we’ve got a unique opportunity there based on our data in REGENERATE to gain approval in Europe.

Great. Thanks for taking all the questions. It was helpful.

Thanks, Ritu.

Thank you. Our next question comes from Salveen Richter from Goldman Sachs. Please go ahead.

Hi, good morning. This is Ross on for Salveen. Just a few quick questions here. So, broadly speaking, if we just think about the conversations you guys are having with payers, what constraints have they highlighted regarding potential commercial NASH drug?

Yes. I mean, I think the first area of focus for them where we believe ultimately will have good alignment is ensuring that the implications they are most concerned about which is this progression to cirrhosis is impacted by ensuring that the patients that are most concerned about, frankly other ones that are addressed.I think that’s where we believe there is going to be good alignment in how we are thinking about the focus on the advanced population as opposed to the really broad NASH group including those earlier patients. So, again, I think that there is a good willingness on the payer to talk about a specific group of patients.Again that they believe need the treatment most urgently and where they see the value and that does overlap I think with the approach that we are taking with a focus on the specialist on the advanced population and ultimately on a benefit like we see in the REGENERATE where we can impact fibrosis.

That’s helpful. And then, just lastly here, so you mentioned that a lot of patients are identified currently using non-invasives. So how does your view on the potential update for OCA change if a liver biopsy for a NASH diagnosis is required in the label?

So, I guess, I would just take a step back on that and the regulatory element of your question, I mean, of course it’s premature to speculate on exact label language. But we do know that it would be atypical for the FDA to mandate the method of diagnosis in the label indication statement.Obviously, we are going to go through the full regulatory process and ultimately the payer process to define the patient population and how this patient should be recognized in the real world.But we do continue to see that payer is preferred to align with medical practice. So, I think we remain confident that this evolution that we keep talking about towards non-invasives will ultimately be the way that the market develops and clearly we are going to have a role to play in that in educating both the physicians.And ultimately, the payers on the way that they can utilize the non-invasive methods that they have out there to identify this group of advanced patients, which I think there is reasonably good alignment from the payers that those types of patients should be the first one that a drug like ours would be targeted towards.

Great. Thank you.

Thank you. Our last question comes from Steve Seedhouse from Raymond James. Please go ahead.

Good morning. Thank you. I have a follow-up on PBC sales. But first, I wanted to ask about REVERSE. The change in endpoint seems more interesting than the increased and – which just seems prudent. So I had a few small questions on the endpoint. Mark, given you indicated FDA reaffirmed their comfort with the old design, post the issuance of the cirrhosis draft guidance, it wasn't clear.Do you have a sense of what the FDA’s view is of this new endpoint given that you mentioned it was Intercept that really decided on the change? And also, since you’re extending follow-up anyway, did you consider making REVERSE an outcome study to align with the FDA’s cirrhosis guidance? And if so, how much longer would that have made REVERSE in your estimation compared to the 18 month endpoint?

Thanks, for the question. Just to be clear, we did not change the endpoint. It’s important to say that, we are reading out on fibrosis improvement with no worsening of NASH and this is essentially the same – it is the same endpoint that we met in REGENERATE.So, what we did do in addition to expanding the size of the study which we extended the duration of the double-blind phase of REVERSE to match up with the 18 month interim phase from REGENERATE. And we just thought that was a prudent thing to do, again to gold plate the study and have identical duration at readout.Just the second part of your question?

Just – did you contemplate an outcome study since you are extending the duration of the endpoint?

Yes, well, so the outcome study is something we decided going into REVERSE that given the wide range of what cirrhosis means. And the fact that we were going for reversal of cirrhosis histologically from F4 to F3 or below, we wanted to study patients with well-compensated early cirrhosis based on the surrogate endpoint.And then, do a separate outcome study in an overlapping, but more advanced population closer to clinical outcomes. It’s very – completely analogous to the approach that we took in PBC and kind of a more standard pursuit and Subpart H accelerated approval programs. So that’s where – because, in a population like this requires substantially more patients for a long duration to get to a sufficient number of clinical outcomes to that.

Okay.

And the only thing I would add and you already alluded to this is, is the fact that, post-FDA’s on draft guidance in this population. They reaffirmed to us the fact that this program that REVERSE assuming its successful will support pursuit of extended indication in this population and that’s not just because we are grandfathered in, but based on what we had carefully designed with FDA and the totality of our data available.

And you are comfortable with the changes that you’ve just made don’t change the FDA’s view that they reaffirmed you?

You mean, no, no, no. It’s quite the opposite. I mean, they welcome. Again, we drove this, they welcome the changes just will generate that much more safety and efficacy data in this critically important population.

Okay. Great. And on PBC sales, the commercial dynamics there, so sales growth seems to substantially outpace scrip growth, and your guidance does seem to imply declines sequentially from the 2Q number at least even at the top-end of the guidance. So, can you just expand on any change in channel inventory this quarter?Sandip, I think you commented briefly in your prepared remarks, are there other one-time dynamics that contributed to this quarter’s U.S. sales number? And your outlook for the second half of the year that maybe hold the line on sales guidance. Thank you.

Yes. Thanks. Good question. I think, overall, we had a very strong quarter. Certainly, underlying demand you can see from IMS trends, it’s probably our best quarter in the U.S. and again, international is contributing very meaningfully in terms of our overall growth. As I did noted in my remarks, that we did noticed especially pharmacy orders outpaced our underlying very strong TRx growth.But that was generally in line with our expectations. It’s within what you would generally expect for a growing product like ours. We expect that to sort of normalize. I think, we’ll have to – there is also at the same time as we think about Q3 and their typical seasonal effects. As you know the summer tends to be a bit slower in general with refills and holidays and vacations and so forth.So, we see that sort of impacting quarter three. But we will see a good strong quarter four. I think, the way we thought about in terms of guidance is right now, we are very – given the strong growth that we have had we changed guidance earlier this year. Based on the Q1 performance, we are seeing great trends here in Q2 as well.And right now, we expect to be at – certainly at the – or very comfortable being at the high-end of the range. I think we’ll have to see how the third quarter evolves over the summer and we can – we’ll provide an update at a later point.

Okay. That’s helpful. Thank you.

Thank you. This concludes our Q&A session. At this time, I would like to turn the call back over to CEO Dr. Mark Pruzanski for closing remarks.

Thanks, operator. Thanks everyone for joining us on today’s call. I just want to leave you with a few key points. I am thrilled that we just had our strongest ever quarter in the PBC business. We’ve continued to execute and exceed expectations on worldwide.We’ve got a great and growing group of talented people in this company currently working day in, day out preparing for our anticipated NASH launch next year supported by the great feedback that we’ve been getting from the key external stakeholders, physicians, payers, patients, who all clearly recognize the beneficial anti-fibrotic profile of OCA based on REGENERATE data. We feel very strong commercial foundation in liver disease.We’ve got the expertise and the ability to execute to drive a successful blockbuster launch in NASH and we look forward to coming back to you next quarter and beyond with our progress. Thanks very much

Thank you, ladies and gentlemen, for attending today's conference. This concludes the program. You may all disconnect. Good day.