Intercept Pharmaceuticals, Inc.

Good day and thank you for standing by. Welcome to the Q3 2022 Intercept Pharmaceuticals earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press TAR 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Narek Chakarian, Executive Director, Investor Relations. Please go ahead.

Thank you.

Good morning, and thank you for joining us on today's call. This morning, we issued a press release announcing our third quarter 2022 results and business updates, which is available on our website at interceptpharma.com. Before we begin our discussion, I'd like to note that during our call, we will be making forward-looking statements, including statements regarding our approved product and clinical development program, certain regulatory matters, 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 believed to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. Some, but not necessarily all, of the risk 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 public filings with the SEC. Today's call will begin with prepared remarks from our President and CEO, Jerry Durso, our Chief Commercial Officer, Linda Richardson, President of Research and Development and Chief Medical Officer, Dr. Michelle Berry, and Chief Financial Officer, Andrew Sake. We will then open the call to take questions. Let me now turn the call over to our CEO, Jerry Durso.

Thanks, Nareg, and good morning, everyone. Thank you for joining us on our third quarter conference call. I'm pleased with our performance and the significant progress we made in our business this quarter. Specifically, we accelerated in-market demand for Ocala and PBC, resulting in a return to double-digit net sales growth for the third quarter. We delivered positive Phase III results for Regenerate and continued to move towards our NDA resubmission of OCA and liver fibrosis due to NASH, and we strengthened our financial position, resulting in an overall improved capital structure. Let me first start with our Ocaliba performance in PBC. We're pleased to have delivered a very strong quarter of double-digit sales growth. The $77.6 million in U.S. Ocaliba net sales reported this morning represents more than 16% growth over the prior year quarter. We're encouraged by the accelerated growth we saw in Ocaliba sales this quarter, as well as strong growth in new patient starts, and as a result, have increased Ocaliba non-GAAP-adjusted net sales guidance to $340 to $350 million for the year. Linda will provide more detail about Ocala's performance in the third quarter shortly. Turning now to NASH, we remain on track to resubmit our NDA for OCA and liver fibrosis due to NASH by the end of this year based on our positive Phase III Regenerate study. Given the analysis we've conducted on Regenerate to date, we believe in the improved benefit-risk profile of OCA and its potential role as the first therapy for liver fibrosis due to NASH. In addition to our regulatory activities, our team is focused on refining our commercial strategy and ensuring readiness while taking a milestone-based approach to our launch investments. Lastly, as a result of recent strategic financial moves, we've increased our total cash position to approximately $500 million, lowered principal debt outstanding to $336 million, and are net cash positive for the first time since 2019. We now have a greater financial flexibility to propel our business forward, focusing on growing Ocala and PBC, progressing our Fibrosis Due to NASH program, and advancing our pipeline. In summary, we remain confident in our ability to drive growth of Ocala and increase market penetration, and we maintain a positive long-term outlook for our PBC business. As the team will discuss later in the call, the long-term outcomes data and real-world evidence we're generating for O'Callaghan PBC are compelling to both patients and prescribers, and we're focused on reaching these audiences with these important data. At the same time, we're continuing to advance OCA as a potential treatment for liver fibrosis due to NASH, where there remains a high unmet need. Overall, we're well-positioned to drive further growth and success. I'll now turn the call over to Linda Richardson. Linda?

Thanks, and good morning, everyone. As Jerry stated, we are very pleased with our commercial performance this quarter. We reported net sales of $77.6 million in Q3 2022, representing a 16.4% increase compared to the same period last year. We are now back to seeing accelerated double-digit growth and believe that Ocala's value to PBC prescribers and patients will continue to generate increased demands. Let's look at the positive dynamics driving these results. New patients, strong underlying demand, and customer engagement and education. In the third quarter, IQVIA reported that our NRX volume was up 37% over the same period last year. This significant increase represents the highest NRX volume we have seen in a single quarter since the start of the COVID-19 pandemic in early 2020. Demand units increased 10% this quarter versus the same period last year. Patient retention and high refill rates at approximately 90% are key contributors to the demand unit performance we are seeing. Strong customer engagement and communication of the benefits of Ocala remain a key element of our strategy. Our teams continue to reach prescribers in person and offices, at dinner meetings, and are reengaging at key congresses and professional meetings. including the Gastroenterology and Hepatology Advanced Practice Providers Meeting and the American College of Gastroenterology meeting last month. Patients are an important focus of our business, and staying connected with them is a priority. We've introduced a new patient campaign to educate and support those who are taking Ocaliba, and we also attended the recent PBCers Patient Advocacy Meeting in October. Finishing up on our PBC business, we've just launched our new promotional campaign for Ocaliba, push back on PBC. In testing, doctors felt that it furthered the idea that there was something more that they could do right now for patients with PBC. We believe that this is just the message we need to convey to help increase market penetration in the sizable segment of appropriate patients who could potentially benefit from the addition of Ocaliba to their PBC regimen. This new campaign will be on display at our booth at the LIBR meeting later this week. In a few minutes, Michelle will discuss more of our activities at AASLD, including the positive real-world evidence for Ocaliba in PBC that her team continues to generate. Turning briefly to NASH, we are actively developing and refining our NASH commercial strategy in anticipation of a potential launch next year. Our NASH disease awareness website, focusing on the importance of addressing advanced fibrosis, is up and running with the NASH Tipping Point Campaign. which we will also be using in our exhibit at AASLD. Recent market research has shown that physicians treating NASH are aware of the need to address fibrosis and see the potential for OCA to be an important option for patients with advanced fibrosis. It is an exciting time to have the commercial team engaged on these efforts, and we look forward to sharing additional details on future calls. In closing, we remain confident in our strategy to drive further adoption of Ocaliba among appropriate PBC patients, and we are excited about a potential future in NASH, where the unmet need remains high. I'll now turn the call over to Dr. Michelle Barry. Michelle?

Thank you, Linda, and good morning, everyone. In addition to our updates this morning, I want to take a moment to note that we'll be sharing new data on Regenerate, PBC outcomes, and INT787 at the liver meeting starting later this week. Looking first at NASH, As Jerry mentioned, our team is working diligently to prepare for resubmission of our NDA for OCA and liver fibrosis due to NASH. As we announced over the summer, the planned interim analysis of the month 18 liver biopsies read using the consensus panel methodology, again, showed a response rate for OCA 25 milligrams that was double that for placebo. A strong dose response and anti-fibrotic effect and other signals of FXR agonism was also observed for the two OCA doses studied. Fibrosis has been shown to be the strongest predictor of liver-related morbidity and mortality. Therefore, we believe this new analysis reaffirms that OCA can play an important role for people living with fibrosis due to NASH. Safety considerations raised during the 2019 FDA review have been examined more deeply through analysis of the robust and mature safety database of more than 8,000 patient years, the largest and longest running phase three trial to date in this space. The hepatic, cardiovascular, and renal safety events the FDA requested have been analyzed by experts in three adjudication committees. The cardiovascular events reviewed by the committee showed a balanced number of events in each of the three treatment groups. Chloramase and the major events associated with it were balanced. Similarly, the adjudicated renal events were rare and balanced. Hepatic events showed a numerically higher number of adjudicated events for OCA 25 milligrams generally reflected biochemical changes that are common in patients with advanced fibrosis due to NASH and the effects of FXR agonism, and a vast majority were mild. Importantly, management of the types of hepatic events observed would be well within the purview of gastroenterologists and other liver experts, our target prescribers. Ultimately, we believe that a larger and longer-running database helps to address many of the questions raised in the first review as all observed safety findings are both monitorable and manageable. We look forward to sharing additional details on both efficacy and safety from Regenerate in a late breaking oral presentation at the liver meeting. With our new analysis in hand, it is our view that the benefit risk of OCA 25 milligrams in patients with fibrosis due to NASH is strong. Following the NDA resubmission, which is anticipated by the end of the year, we expect an advisory committee meeting in the spring as part of a six-month review process. While the reverse Phase III study evaluating the safety and efficacy of OCA in patients with compensated cirrhosis due to NASH did not meet its histology primary endpoint, we were encouraged that the FibroScan data showed a reduction in liver stiffness of 3 kilopascals a clinically significant result. In addition, there were no new safety signals for OCA observed in this population of patients. Further analyses of reverse data are ongoing, and we plan to share these data at an upcoming scientific conference. Achieving statistical significance on a histology endpoint and compensated cirrhosis due to NASH has proven to be an extremely high bar in clinical trials, underscoring the urgency to intervene in patients with advanced fibrosis before they progress to cirrhosis. As we've noted previously, our planned NDA resubmission is not impacted by the results of reverse. The agency has been very clear that regenerate and reverse enroll two different patient populations. Nevertheless, should the FDA ask for any safety data from reverse, we will be ready to provide it. Turning to updates in PBC, We remain committed to generating a wealth of real-world evidence to support Ocaliva and PBC. We've made significant progress on these plans this quarter. First, the leading journal, Gastroenterology, published data that showed improved transplant-free survival observed for patients administered Ocaliva in a clinical trial compared to natural history data from two large patient registries. In this publication, patients treated with Ocaliva had an approximately 70% lower relative risk of death or liver transplant at any time during follow-up compared to the control patients from either patient registry. The consistent effect size across the two external control cohorts strengthens our confidence in these observations. This study is the first to demonstrate that Ocalva treatment is associated with improved transplant-free survival, the ultimate goal of therapy in PBC. Starting later this week, we'll be sharing other real-world and outcomes data for Ocaliba at the liver meeting. We're pleased that the analysis of our Phase IV cobalt study with external controls has been accepted as a late-breaking poster presentation. A strong OCA benefit was demonstrated when comparing as-treated OCA subjects from cobalt with rigorously matched external controls. These data provide evidence that OCA decreases the risk of death, liver transplant, and decompensation. Second, we'll be sharing the detailed results from HEROES-US, our real-world study that leverages Komodo Health, a U.S. claims database, to compare clinical outcomes in a predefined group of patients with PBC who were treated with Ocalva and a comparable group of PBC patients who were eligible but who were not treated. As a reminder, top-line data from this study were shared earlier this year and again showed a statistically significant improvement in event-free survival in patients receiving Ocalva for PBC. Specifically, individuals with PBC who received Ocalva had a 63% reduction in risk of all-cause death, liver transplant, or hospitalization for hepatic decompensation than the control groups at any time during follow-up. The real-world evidence we have accumulated thus far from large data sets in the US, UK, and Europe is compelling and consistent and demonstrates the long-term clinical benefits of Ocaliva and PBC, specifically around transplant-free survival, which we know to be the most important goal for patients. Ultimately, these data will be included in a regulatory submission to FDA in support of fulfilling our post-marketing requirements for Ocaliva and PBC. In addition to the real-world evidence, we will be including expert adjudications of events from our Phase 4 study, Cobalt, as requested by FDA, which will bring our anticipated timing for the PBC-SMDA submission into 2023. We remain committed to working closely with PBC patients through our clinical trials, meeting our post-marketing commitments, and demonstrating the clinical benefits of long-term therapy with Ocaliba. Building on our long-standing commitment to PBC, our fixed-dose combination of OCA plus Bezofibrate is ongoing, and we continue to enroll patients in our Phase II studies evaluating different doses of the two components. We remain excited about the potential benefits that this combination can provide to individuals living with PBC and look forward to sharing updates on the dose selection and on our Phase III study design next year. Turning now to our earlier stage pipeline, our comprehensive phase one study for our next generation FXR agonist INT787 has progressed to its final cohort. We look forward to sharing data from our phase one studies at the liver meeting, as well as our lead indication and updates on our proof of concept study fresh next week. At this point, I'll turn the call over to Andrew for a financial update. Andrew?

Thank you, Michelle, and good morning, everyone. I will be providing an update of our financial results, and I ask that you please refer to our press release issued earlier today for a summary of our financial results for the third quarter ended September 30, 2022. As a reminder, the divestiture of our international business was completed on July 1, and as previously stated, Our full year results and guidance will include the divested business for only the first half of the year, given the date of the deal closure. Additionally, the sale of the international business and the repurchase of $389 million of our 2026 secured convertible notes netted in a material gain to our P&L, which I will detail later in my remarks. Let me start with revenue. We had a strong third quarter, recording $77.6 million in net sales as compared to $66.6 million in net sales in the prior year quarter. We reported $87.7 million in total operating expenses and $82.7 million in non-GAAP adjusted operating expenses. This compares to the third quarter ended on September 30, 2022, where we recorded $86.2 million in total operating expenses and $89.6 million in non-GAAP adjusted operating expenses. Cost of sales were $0.4 million and $0.2 million, respectively, for quarters ended September 30, 2022 and 2021, and consisted primarily of packaging, labeling materials, and other related expenses. Selling, general, and administrative expenses were $43.3 million in the third quarter of 2022, up from $41.3 million in the prior year quarter. The increase was primarily driven by increased commercial activities and costs related to our patent defense. Research and development expenses were $44 million in the third quarter of 2022, materially unchanged from $44.7 million in the prior year quarter. Interest expense in the quarters ended September 30th, 2022 and 2021 was $5.2 million and $14.1 million respectively. For the quarter ended September 30th, 2022, interest expense is related to the principal amounts of our outstanding convertible notes and no longer includes any accretion of debt discounts upon adoption of ASU 2020-06. We reported net income of $267.5 million, an increase compared to a net loss of $3.6 million in the third quarter 2021. The increase was driven by the significant gain resulting from the sale of our ex-US business of $371.5 million, which was partially offset by a loss on extinguishment of 2026 convertible secured notes of $91.8 million. The third quarter of 2022 was a transformative one for Intercept with regard to our capital structure. During the quarter, we successfully repurchased $389 million of our 2026 secured convertible notes. As a result of these transactions, we have reduced our debt by 54% and reduced our cash interest expense by 58%, or $13.6 million annually. Further, with approximately $500 million in cash, cash equivalents, restricted cash, and investment debt securities available for sale, and $336 million in debt, we are now net cash positive for the first time since 2019. In summary, we have a strong financial position and are comfortable that our current balance sheet gives us financial flexibility to grow our existing business in PBC, support a launch in NASH, and progress our pipeline. With that, I'd now like to turn it over to the operator for any questions. Operator?

As a reminder, to ask questions, you will need to press TAR11 on your telephone. Please stand by while we compile the Q&A roster. And our first question comes from the line of Yasmin Rahimi with Piper Sandler. Your line is now open.

Good morning, team. Thank you so much for all the great updates. I just wanted a clarification question. Did you comment on that at this upcoming liver meeting? We will be seeing month 48 biopsy data from the regenerate analyses. And if you could just provide some commentary of whether we will be getting, you know, both like one-point improvement of fibrosis as well as NASH resolution. If you could just provide that, that would be helpful. Jill, maybe you start there.

Yes, Pappy. Good morning, Yev. We will not be giving any month 48 data. This submission is focused on the planned interim analysis of the month 18 data. So that will be our presentation, and we'll stop at the month 18 data. Again, on the resubmission, we focused on the new analysis of the consensus methodology looking just at month 18. Okay.

But the resubmission will only include week 18, not week 48 either then.

Is that correct? It's focused on the month 18, the resubmission looking at the old central analysis and the new consensus methodology. Okay.

Great. And then team, another one follow-up question is in regards to the supplementary data that's being submitted for full approval in PBC. So what has been some of the communication that you've gotten from the FDA? How receptive are they towards, you know, reviewing this data and potentially allowing full approval? If you could just provide some color beyond what you had in your prepared remarks, it would be very helpful. And then I'll jump back into the queue.

Yeah, thanks, Jess. Maybe I'll start and then Michelle can add in. So as Michelle outlined in her prepared remarks, it's a comprehensive package that's being prepared. She outlined, obviously, the data coming from Cobalt as well as a slew of real-world data sets that we think put us in a solid position overall in terms of the comprehensive nature of the package. We also believe, of course, that Ocaliba continues to be an important medicine, the only second-line therapy in PBC approved. We're continuing to do the right work. We look forward to continuing what I think I would frame as being a productive dialogue with the agency and reengaging with them once we resubmit in defining the work we need to do moving forward. So, Michelle, anything else from your end?

The only thing I'd add is we have had a very good interaction with the folks at FDA, including the individuals within the real-world evidence part of the FDA. So, we are excited about being what would be the first non-ultra-rare disease to submit a substantial package of real-world evidence data that we've been generating on. The standards for the real-world evidence generation have to meet those of a randomized prospectively enrolled clinical trial. So we've been making sure we've reviewed every one of the guidances that have been issued over the last 18 months or so by the FDA to make sure that we're meeting those criteria. But we are I'm excited about this opportunity, given the breadth of data that we know we have, given the 30,000 patient years of data that exist for Ocala.

Thank you, Michelle.

Thank you. Your next question comes from the line of Ritu Varal with Cohen. Your line is now open.

Good morning, guys. Thanks for taking the question. I've got one high-level question, a little granular one as a follow-up. Jerry, now that you've got this healthy balance sheet and you're looking towards expenses for NashLaunch and potential BD, how are you looking to, I guess, balance the costs of both of them? And if you could give us an update on what you might be thinking about the pipeline just beyond 787 and the Visa-Fibrate combo.

Okay. A few items there. I'll try to step three. Ritu, thank you very much for the questions. I think we do, as you said, feel good about the work we've done on the balance sheet. We think it puts us in a good position as we do all the right work now to finalize and resubmit by the end of the year. Linda mentioned in her prepared remarks the fact that the commercial efforts are flexing up, primarily first, I think, in the areas of refining our strategy, taking a contemporary look back into the customer considerations from the payer physician and payer side, and I think you'll hear more as we get into next year about where we're evolving the commercial thinking. We are going to, I think, take a prudent approach in how we ramp up towards commercial readiness, and so we'll balance both sides of that. We are excited about the first moves we made in our pipeline with 787, and I'll highlight the fact that we'll have more information on about 787 and some of the initial data, but also what we're thinking in terms of lead indication as we get into next week. So those are the first bets from the pipeline. We'll have more to say about the pipeline over time, and again, I think we feel that the moves we made on the finance side give us the means to do what we need to do, both moving NASH forward, continuing to grow PBC, and now getting more constructive with the pipeline.

So no focus on BD right now in the near-term future to build out the pipeline further than what you just said?

So look, I think we're always looking and considering how best to leverage the capabilities we have and the capabilities both on the R&D side and on the commercial side of the house, but nothing else definitive for me to say right now on that.

Got it. And just a quick follow-up, Michelle, for you. On the presentation, on the, I guess, the regenerate, reread presentation, you mentioned there'll be more detail on the safety. Can you give us more, I guess, top line on the balance of the SAEs on the hepatic side? You did mention there were more 25-milligrams. sorry, events on the 25 milligram. Can you talk to the SAE number between the arms and the cholestatic events as well?

Yeah, thanks, Richie. So just before we leave the pipeline, just want to mention that we are spending a lot of time and resource on our fixed dose combination and on 787. So really excited to be talking more about that at the liver meeting. So look forward to sharing that. On the presentation as a late breaker, we do look forward to sharing more data. I think you'll be pleased to see the detail we've been able to include in the hepatic events and specifically on those adjudicated by the committee. Most of those that were seen in the placebo group are obviously most related to the progression of disease. And those that you see in OCA10 and especially in OCA25 are really biochemical excursions that are seen. I think what we have been able to show and we'll be sharing in the presentation is very reassuring about the overall profile and all very monitorable, manageable, and reversible. So, again, that's really key when you start looking at some of these hepatic events That's the detail that we'll be able to share next week.

Got it. And one quick last question. As you think about the SNDA for PBC, is there a potential for the SNDA process to validate ALCFOS as a full, approvable endpoint for PBC, thereby potentially expediting the combination pathway?

That's a great question and one that we've spent a lot of time thinking about. What's very clear about ALPOS is ALP is really helpful in the early disease stage, but like the aminotransferases, tends to burn out as patients have more advanced disease. And what we are seeing is that total billy is more important. It's a stronger predictor of those outcomes. Now that we have outcomes data, we're really in a great place to be able to look at, develop a composite endpoint that really pulls in multiple different biomeasures for these patients beyond ALP. There's a lot more to the disease than ALP. It was a great biomarker for us for the POI study in an early disease patient population. But really, as we look at the range, the broad range of patients who are benefiting from Ocaliva, I think we have a bigger opportunity there to look at now with our outcomes data and what is the best predictor of those outcomes. But again, the outcomes data is really what's going to be critical for Ocaliva. We're the only compound that's now shown improved transplant-free survival. That's really what's key.

Great. Thanks for taking all the questions and look forward to seeing you guys at ASLD. Yep, you too. We'll see you down there.

Your next question comes from the line of Steven Seedhouse with Raymond James. Your line is now open.

Good morning. Thank you. It sounded perhaps like the refill rate or the persistence in PBC has gone up recently. I was hoping you could maybe expand on that and if it has improved of late, what you attribute that to and if you expect that to persist going forward.

Thanks, Steve. We do feel good about the dynamics we're seeing and Linda can go deeper there.

Yeah, I think it's really remarkable that you see the refill rate and persistency kind of continuing to climb at this point in a product's life cycle. And we're very keen on that element of our sustainability. I think some of it comes from clearly understanding how to manage pruritus. That's one thing that we know that physicians understand how to do. And there's also the building body of evidence where you see what we're reporting with outcomes. And that is extremely meaningful when that is articulated. Physicians and nurse practitioners, PAs, spend a lot of time with the patients when they're putting them on therapy. And as they have become aware through this scientific landscape of what we've demonstrated, I think that gives a meaningful push to stay on therapy when some of the physicians who've seen this data presented, seen the articles, have engaged with us even as recently as ACG.

Can I just follow up on the pruritus management? Are you noticing, I mean, are you referring to sort of just treatment regimens that in the real world, you know, providers are optimizing or, you know, just getting more experience? Is that a landscape evolving? Thanks.

Yeah, I think there's two elements there. There is the reality that the constant reminders and overstatement and checking in, did you itch, did you itch, did you itch, did you have any sense of itching in the clinical trial results are different than that that we've seen in the real world. And the majority of the pruritus that you see can start in the beginning and then ameliorate over time. There are activities and things that people can do. to help with that. And I think in the real world, we just don't see it as much. And there was an article on this that was published before on how it is not as extreme as it's made out to be. So I think you couldn't stay on a therapy that you didn't tolerate, right? And we found that this consistent refill rate is evidence of patient satisfaction and ability to stay on the drug.

Thanks so much. Thanks, Stephen.

Your next question comes from the line of Thomas Smith with SVB Securities. Your line is now open.

Hey, guys. Good morning. Thanks for taking the questions. Just on the OCA resubmission in NASH, you've previously talked about having an additional 518-month biopsy available from a January. Are you expecting the resubmission will include this additional data set? And then can we expect to see these results included in the ASLD late-breaking presentation?

Del? Can we take that, Jerry? Yes. Yes, so we will be including those patients who underwent biopsy. Those are certainly going to be part of our submission. And we will be including that. What I can say about it is it's very consistent. with what we have seen in the original ITG population that includes just the F2, F3s. But because we have on list an additional 750 or so patients who underwent month 18 biopsies, we will include that in our submission. It's not the primary focus of the FDA. They really wanted to look at those for whom we had a central read and this new consensus read to compare those But we will be, of course, including all of those data.

Okay, understood. And fair to say that this won't be a focus of the late-breaking presentation next week?

It's not a focus. We are really focused on providing more granular data on the safety and tolerability of these patients, some of the data that we didn't have at the time of the top line. So we, again, that'll be the focus of the presentation. It's only 10 minutes, so we will be trying to cram in as much as we can to make sure we've answered all the questions that we know came up, that we just didn't have the answers yet for the top line. But we will be including those additional patients who had month 18 biopsies.

Okay, great. And just a quick follow-up question. Maybe you can provide a little color. What's the latest projection on when we might see outcomes data from the Regenerate study?

That's a great question.

Our current guidance about three years. Sorry, Terry. We are going to be looking at that with some of the new data that's been published. So we'll be able to give you a little more guidance there later next year.

Our current estimate is Our current estimate, Thomas, is 2025, although, as Michelle said, we'll work to see if there's a reason to update that once we have the right information in order to be able to remodel.

Okay, got it. Great. Thanks, guys. I appreciate you taking the questions, and looking forward to the presentation.

Thank you.

Your next question comes from the line of Mayank Mamthani with Beaver Alley. Your line is now open.

Good morning. Congrats on a strong quarter and thanks for taking our question. So maybe just a couple of related questions. With the NLX volume increase, are you able to comment if there's a particular PVC patient type that, you know, you previously found less viable? Just wondering if it's about the hepatologist behavior post-outcome data or is it about you know, patient not being... ...to an outpost level that's, you know, viewed to be elevated in a clinical trial setting, if you could comment on that.

Overall, I think the... The trends look solid and really as a result of the updated plan from Linda and the team, I think we've been really encouraged over the past several quarters as we moved out of the label change that our ability to re-stimulate the growth of new patients for the appropriate patient within the existing label. And really, I think I would highlight a lot of the efforts, not only with the, you mentioned the hepatologist, but really With the additional allied professionals that are supporting the community-based gastroenterology practices, I think there's been good traction there once we are able to get the message out about the label change. And as we kind of estimated and forecasted at the time, it would take a few quarters to work through. And I think we're right now in that window where we've worked through that history and you start to see the growth overall accelerating in terms of total demand, but in particularly this new patient start, which I think speaks well about what we should see in the coming quarters.

Yeah, and I think this was, in our minds, you know, a predictable event, a pivot point where we would start to see the underlying growth. We're no longer talking about label change patients who were dropping out and being compared to a larger database, but we see folks understanding the impact there is considerable opportunity within the on-label population, the new label population. And as we continue to use our REACH strategy and talk to gastroenterologists and their supporters in the community, that's where we're getting the message out. And we have not really been able to, other than folks who have, you know, requested data from MSLs or seen the data or heard the press releases themselves, heard that information, been able to talk about the outcomes data at all. Our first opportunity to do anything with it, you know, in terms of a sales rep is to potentially drop it once it's been peer-reviewed and published. And there are ways that you can start to do that that we'll obviously conform to and follow. But this is just word of mouth and people understanding and programs and questions. So we believe that the growth is still there, and we will continue to move forward with that.

Great. And then just to clarify, Michelle, your comment on the two pieces of the hepatic safety that you're following. One is obviously the hepatic events that you will have more data next week on the late breaker, but then also the liver outcomes that you're following as part of the efficacy analysis. Could you just clarify, and maybe this is a silly question, but just to clarify how those two have any overlap, if any? And then I just have a quick follow-up.

So to be clear, they don't have overlap. Although many might be the same events, they're adjudicated through different experts. So we have a hepatic safety adjudication committee that is specifically looking at drug-induced liver injury. So that's the focus of the safety event. To be clear, in our presentation next week, we will not have any outcomes. The focus of this analysis, which was a pre-planned analysis in collaboration with the FDA, was a reanalysis of the original 931 patients that were read originally under a central read, now read under a consensus panel. We will be sharing those data, plus the additional patients who will be submitted together with the 931 patients. As Jerry said earlier, we expect that outcomes will be in the 2025 range. We have not started looking at those data with the new modeling that's been available over the last couple of years. That's something that we'll be turning to after the NDA resubmission by the end of the year.

Thank you for that clarification. And just finally for Jerry or Andy, about the IP settlement recently, could you just talk about the implications and how might you be tracking with other ANDA filers and if we should hear anything from you in the near term?

Andrew?

Yeah, no, thanks for the question. So really no change there. We obviously have the antifilers. We currently have six antifilers, five of which are included in the current litigation. We continue to maintain that we feel very strongly about our IP, and our current view is that we're going to continue to have IP protection of Ocala into the 2030s. So we're continuing to defend our IP. We feel very good about it. And really, no change. Steady as she goes.

Thanks for taking our questions.

Thanks, man.

Your next question comes from the line off. Brian's Corny with Baird. Your line is now open.

Hi, this is Luke Herman on for Brian. Thanks for taking the question. Just to follow up on 787, can you remind us how it's differentiated from OCA from what you've seen preclinically and what we could see in the phase one data that could provide confidence in this differentiation?

Thanks for the question, Luke, as Michelle. Yeah, go ahead, Michelle.

Sorry. We have two posters. The abstracts are out now. So one is the preclinical data that I think will be helpful in understanding the differentiation 787 is a more hydrophilic compound, so that means that the FXR targeting is more likely to be gut, so more gut, less liver, and that gives us some other opportunities. You'll see that in the abstract and in the poster where we go into some of the preclinical data, including some animal models. And then we also have our phase one data, As we mentioned in the comments, we're in our last cohort of the multiple ascending dose study, really just to make sure we've got broad coverage there for the exposures, depending on which patient populations and their hepatic impairment, to make sure we've got that safety. So we're really excited about this molecule, have a lot of, a breadth of opportunities to explore there, but excited about our lead indication and sharing those data with you over the next week.

Great. And could you share any color about expectations for the timeline to getting a Phase 2 up and running?

We'll be sharing those data next week, early next week.

Okay. Thank you. Thanks, Luke.

Thank you.

Your next question comes from the line off. Michael Yee with Jefferies. Your line is now open.

Hey, good morning. I'm tempted to ask five questions like everybody, but I'm just going to keep it to two. First question is, Michelle, will you have any information on endpoints like progression of cirrhosis or any of the components of the outcomes? Have you looked at any of those individually? And have you, as a DSMC, looked at either an interim or futility on the total outcomes? That's question number one. Maybe that's one and a half questions. And the second question is it's been a few years, actually, since we went back and did, you know, the NASH day and all those types of things if we go back. And so there used to be a question about biopsies and how to think about that. How is your thinking around the evolution of biopsy or what payers would use to define F2, 3, and biopsies and that type of requirements evolved over the past year or two? Thank you.

Yeah, Mike, maybe I'll jump on that one first, and then Michelle can come back second on the point of... So, obviously, Mike, as we talked about in the past, you know, that is an area, the identification of the right patient's in the real world will be an important dimension of a potential launch here. We're, you know, doing the updated work on where is the market today, the consideration of payers and specialists. And I would anticipate similarly to what we did, which I guess was about the end of 19, where we had kind of a fulsome look at those elements in advance of the a launch, we will do that again. I think that's some of the work and considerations that we're working through now with our updated data set in hand. So more to come on kind of the commercial thing. I would just say, and I'm sure we can go deeper on this point, and we'll see some additional indicators also at the liver meeting next week, the utilization and proliferations of noninvasive drugs means of identification of patients has only grown over the last couple of years. And so there has been some positive progress made on that front that I think is going to be, again, an interesting element in the update that we'll come back with. I think your first question, Mike, was on outcomes, and Michelle can touch on that.

Yeah, particularly, Michelle, as it relates to either interim utilities or what the DMC is also looking at. Thank you.

Yep, so happy to touch on that. And as I said earlier, this submission is really focused on this planned interim analysis and the reanalysis of those 931 patients. Because of that, and because it was a planned interim and a reanalysis of those 931, we don't take any alpha hit And that was really important in our conversations with the FDA, that we are not looking at the outcomes. It's really critical. We don't want to use any of that alpha spend. We want to maintain that and keep that for our outcomes data. So we have not started looking at that. The DMC is really focused on safety. We are going to be, as I said, looking at the contribution of histology and progression to cirrhosis, that's a different committee. So not the DILI experts. This is a group of hepatologists whose expertise is really in defining that progression to cirrhosis. So they've been looking at that. They report into the DMC. All of our committees are blinded as are the three safety committees. This progression to cirrhosis outcomes committee also remains blinded, and then they feed that into the DMC. Just to be clear, though, because a DMC is just looking at safety, it doesn't mean that they don't also look at efficacy and those rates. I've been involved with other DMCs where you don't have any chance of showing an outcome. And in that instance, everything that's on the safety front is a risk. Therefore, there is no benefit risk. So that's always part of a DMC charter and kind of what underlies the DMC's role. So again, a different committee that's looking at those. We will be looking at that and providing them with some additional data next year and doing some additional modeling. I just want to touch again on the non-invasive tests. We know that you can't validate a non-invasive surrogate marker against another surrogate marker. FDA has been pretty clear about that. They can only be validated against outcomes. So we know collecting these data throughout this very large trial that we now have patients out at six and seven years So we do have that opportunity coming around the corner for looking at outcomes. And that is going to be really critical for the validation of some of these non-invasive tests. It's a few years away, as Jerry said, though, not something that's going to be validated prior to what could potentially be a first approval, which is just, again, based on these 18-month biopsies. certainly a hot topic, something we're continuing to pay a lot of attention to and amass a lot of data in these thousands of patients. Thanks for the question, Michael.

Thank you. And your next question comes from the line of And Darcy, with HC main right, your line is now open.

Hi, great. Thanks for taking my questions. Firstly, I wanted to ask in PBC, given the additional data that you're submitting towards full approval, including cobalt and real-world data sets that you mentioned, and in particular the data around transplant-free survival, I'm just wondering if there's any expectations that you can share with us in terms of label updates after that review, either in terms of additional long-term data or removal of any sort of warnings or restrictions. And then I have a follow-up. Thanks.

Michelle, maybe you can jump in there.

Yes, we're really focused on the review of the real-world evidence, the importance of having what the FDA considers irreversible morbidity, so survival certainly falls in that category, and how that can play a role. Having said that, this would be the first non-ultra-rare condition that this will be reviewed. So I don't really want to speak to our expectations or what we anticipate the FDA would make decisions on on that basis. I think the importance for us is really going to be getting the word out about these outcomes, about improved transplant-free survival and how critical that is. And we've really moved beyond the biochemical markers. This is not about an accelerated approval anymore. This is really about fulfilling our post-marketing requirements and spreading the word that across multiple different independent data sets, we now have data on transplant-free survival, which I know how critical that is for patients to consider.

Okay. Thanks for that. And then, turning to your pipeline, I think you mentioned earlier a lot of time and resources are spent now on this fixed dose combination study as well as 787. So just wondering if, you know, beyond the data that we can expect this weekend, wondering if you could update us on the status of both of those programs, in particular the timing of, you know, the full timing of full data from the current studies. Thank you.

Yep, the fixed-dose combination, probably. Yep, early next year on the fixed-dose combination, we look forward to sharing some of the data on the interim analyses for these two Phase II studies that are exploring different doses of OCA and of Bezofibrate. We know Bezofibrate's been used at some of the higher doses, 400 milligrams in In a generic form, in Europe, we're looking at whether combinations of the two drugs can improve on efficacy, improve tolerability. So, a lot of questions that we want to look at. It's not just on the PKPD, though. I really want to look at overall safety tolerability. That's a really important question for us, as well as the design of the Phase III study. A lot of thinking going on right now while we're recruiting, finishing up the phase two studies, both in the U.S., Europe, and beyond for the phase twos. In addition to a large phase one study, we mentioned previously that we were backfilling some of the data from phase one, given it's been a while since that some of those studies weren't to the standards that we wanted. We really wanted to explore some of the drug-drug interaction data as well. The 787 as well, we will be sharing some data as early as next week, and then I think you'll be hearing a lot more about that phase two study in early 2023. So we're excited about the growing pipeline.

Great. Thanks for that. And look forward to seeing you in DC in a few days.

And you too.

Thanks, Ed.

Your next question comes from the line of Ellie Murley with UBS. Your line is now open.

Hi, guys. Thanks so much for taking the question. Congrats on all the progress in PBC. Maybe just in terms of the recent strength and how you're thinking about longer term when you might sort of face some competition with some new players, such as some other PPARs, maybe kind of how you're thinking about how Bezafibrate might compare to some of these PPARs and specifically comment on kind of the selectivity across PPAR alpha, delta, and also just in terms of what we can look for perhaps in some of the upcoming data sets from your Bezafibrate combo and thinking about comparing to some of the other sort of emerging PPC assets. Thanks.

Okay, maybe we start maybe, Michelle, from your side, and then, Linda, if there's anything in terms of everything we're learning on the competitive front in the market, we can go both ways there.

I think for me, on PVC, again, reiterating the importance of our ability to now show transplant-free survival. I know a lot of our competitors are focused on the earlier phase of development, on the biochemical changes and how that might predict long-term outcomes, but we've made past that. We now have those data from these large, real-world studies, including claims databases, patient registries, and I think that's really what is the main take-home there from a competitor perspective. We are looking at how we can help clinicians and patients understand what their biochemistries might mean now that we do have those outcomes data, so I look forward to that. Not focused on ALP, though, which we think is really most helpful in those earlier stage patients and not across the broad spectrum. So be watching for more data, again, on the real-world outcomes and some of the ways we might help our patients and clinicians in predicting how the changes that they're seeing might actually correlate with the outcomes that we've seen. Linda?

I kind of divide my comments into some categories related first to bezofibrate. We know that bezofibrate has been studied for use in the management of PBC in investigator-initiated trials and in larger trials, particularly in Japan. So there's a familiarity with the effects of that bezofibrate pan-PPAR activity that are well understood. Now, when we combine that, as Michelle was saying, with the known impacts that we have, and there's two different mechanisms of action, when we're looking at the fine balance of what's the optimal potential for dosing to actually increase efficacy, potentially improve tolerability, and see if we can really come up with a new molecule that will be an NCE with its own patent life, et cetera. So we look at it from what can this, you know, I think the probability of technical success in lowering and improving biomarkers in PBC is certainly there. We've seen evidence from small studies in Europe with a combination of the two showing an improvement after ERSO, a greater improvement if you add Ocalibur first and then Bezafibrate second, but an improvement regardless of order. So I think in terms of a commitment to PBC and lifecycle management, we certainly have that opportunity. When we look at the competition currently coming out with different PPARs who are, I think, you know, trying to position themselves vis-a-vis one another and creating Delta PPARs and whatever, you know, it's PPARs. So that's kind of some marketing activity and gamesmanship in terms of positioning. So I understand totally what's going on there. But Billy Rubin, as Michelle has indicated, you know, Billy Rubin, what we're seeing is the most predictive element. And we have very strong activity on bilirubin, and we've sustained bilirubin, you know, lowered and sustained bilirubin levels in our data. In the POIS open-label extension data, you know, we have that data. We have data not only on bilirubin, but we also have data on stabilization of fibrosis. And physicians, when they've seen this presented as some, you know, additional information we've been talking about, in our campaign, that is not what one would expect, right? This was prior to even having the results on outcomes. So I think all of this leads to the impressive data we've generated from multiple sources. I mean, if this were a one-off, you'd be pleased, but when you see it triangulating from different databases and coming up with the same kind of literally overlayable reads on the risk reduction, that's an impressive thing to be presenting. So I feel like that data is beyond ALP and is starting to hit the marketplace and moving forward. So we'll see how other people answer to our ability to discuss and generate outcomes data. Thanks, Sally. Thanks.

Your next question comes from the line of Catherine Occoni with J&P Securities. Your line is now open.

Hi, this is Catherine Occoni. I'm coming on on behalf of John Walden. And one question that we had was how the emerging market might play into the FDA decision regarding the supplemental package in PBC. I know you sort of discussed the commercial aspect of it, but does it play any role in the FDA decision? as it looks through the supplemental package.

Thank you. I'm sorry. I didn't follow the first. I couldn't hear the first part of your question, Catherine. How, what plays into the FDA's consideration?

The emerging markets, like the emerging pipeline that's coming out in PBC.

Yeah, look, I mean, Michelle can comment, I would say, up front. I think the FDA is looking at our package. As we said, it's a pretty robust package. We're in a position of advantage in terms of our ability to have a long-term view at the questions on the table. And so we've been, I think, generating the data accordingly and approaching the conversation with the FDA with a focus on what we've been able to do from a longer-term perspective based on all the experience, as Michelle indicated, the COBOL data set, the real world, as well as the post-marketing data with over 20,000 patient years, I think, puts our data set in a unique perspective there.

I think, too, the competitive, you know, the competitors are not anticipated to be on the market during the timeframe where we're being re-evaluated, and it's the only second line therapy approved for PVC patients. I'm not sure that competitive context comes into play with the immediacy of our review next year, potentially.

Thank you. Thank you. And I just had one follow-up as far as timing. Beyond just next year, are you able to refine the timing at all?

No. What I would say is the work is ongoing, obviously, in parallel to the to the heavy work that Michelle and her team are doing with the NASH resubmission expected by the end of the year. And if we have a need to refine, we'll do that at the appropriate point.

Great. Thank you so much.

Thank you.

Your last question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open.

Hi, good morning, and thanks for taking the question. This is Mason for Salveen. On NASH and the various segments of the patient population, your team has talked about Ocala positioning for the more advanced population and a focus more on the F3 later stage population. So with respect to the reverse trial results, even though the FDA sees these as distinct indications, do you think that missing the endpoint there has any impact on how clinicians view Ocala, the potential as an anti-fibrotic in F3 patients, like especially for people who are sort of teetering between F3 and F4. It would just be really useful to understand how your team thinks about this. Thank you.

Yeah, thanks for the question, Mason. We have indicated in the past, and that's part of the validation work that Linda's team is is undertaking now a focus more towards the advanced fibrotic segments. I think we're still going towards that direction, albeit we're refining exactly what that may mean with the current data set we have on mind. As Michelle indicated, and we've continued to say, the agency has looked at these populations differently, and it was a different population. The more advanced compensated cirrhotic in reverse is a different population with more advanced disease. And obviously, 25 milligrams for the time studied was not an effective dose, and contrast that to what we saw in Regenerate, where now multiple times at 25 milligrams we see the strong antifibrotic effect. And, you know, the understanding in the potential target physicians, gastroenterologists and hepatologists, about the role of impacting fibrosis for those more advanced fibrotic segment is something that is well understood and appreciated. And I think that while we'll refine exactly how we'll position things, I do believe that the antifibrotic effect for the more advanced populations, like we studied in Regenerate, will be at the heart of our value proposition as we prepare to launch. As I said earlier, we'll have a lot more insight on that as we get closer and we'll have the opportunity to, similar to the way we did in the past, present more details on the commercial plan in the future.

All right. Thank you.

Yeah, I think that's all the questions we had. I want to thank everybody for joining us today. As I said in the upfront, we feel very good about the progress that we made this quarter. We look forward about the the work ahead and particularly interesting, you know, sharing an in-person session with the liver community at the meeting next week down in Washington, D.C. So thanks and look forward to providing more updates in the time to come. Thanks and everybody have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.