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Intercept Pharmaceuticals, Inc (NASDAQ:ICPT)

Q4 2013 Earnings Conference Call

March 17, 2014 8:30 AM ET

Executives

Senthil Sundaram – Senior Director-Corporate Development

Mark E. Pruzanski – President, Chief Executive Officer, and Director

Barbara Gayle Duncan – Chief Financial Officer, Secretary, and Treasurer

Analysts

Rachel McMinn – Bank of America Merrill Lynch

Jonathan Eckard – Citi

Jim Birchenough – BMO Capital Markets

Alan Carr – Needham & Co. LLC

Akiva Y. Felt – Oppenheimer & Co., Inc. (Broker)

Jim Molloy – Summer Street Research Partners

Jim Birchenough – BMO Capital Markets

Operator

Good day, ladies and gentlemen. Thank you for joining Intercept Pharmaceuticals’ Full-Year 2013 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. Following the formal report, Intercept management will open the lines for question-and-answer period. Please be advised that this call is being taped at the company's request and a webcast of this call will be archived on the company's website for two weeks from today's date.

At this time, I'd like to introduce Senthil Sundaram, Intercept's Senior Director of Corporate Development. Please go ahead.

Senthil Sundaram

Good morning and thank you for joining us on today’s call. We are reporting on financial results for the year-ended December 31, 2013, and we are also providing an update on development programs, including the positive POISE trial results that were released yesterday and the additional FLINT trial information provide on our 10-K on Friday.

Before we begin, please remember that we will be making certain forward-looking statements on today's call including statements and forecasts regarding our future, financial, and operating performance, our POISE and FLINT trials, anticipated time lines for the potential approval and commercial launch of obeticholic acid in our regulatory, clinical and commercial plans, goals and estimates as well as other statements which relate to future events. These statements are based on the beliefs and expectations of management as of today.

Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in our reports filed with the SEC, including of the Risk Factors section of our most recent Annual Report on Form 10-K for fiscal 2013 that was filed this past Friday, March 14. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events or otherwise. The format for today's call will include opening remarks from Intercept's management team and then we'll open up the call to take your questions.

At this time, it's my pleasure to turn the call over to our CEO, Dr. Mark Pruzanski.

Mark E. Pruzanski

Thanks, Senthil, and thanks everyone who is joined us on our conference call and webcast this morning. I'm going to provide you with an update on the development of our lead product candidate, obeticholic acid or OCA. And then turn over to Barbara Duncan, our Chief Financial Officer, who will discuss our 2013 financial results, year-end cash position and cash run rate.

As announced in our press release yesterday, we are absolutely thrilled to report that our Phase 3 POISE trial in primary biliary cirrhosis or PBC clearly met its primary endpoint as well as secondary liver function endpoints with very high statistical significance at both doses tested.

In fact, not only did both OCA doses meet the primary endpoint at 12 months, the end of study, but also at every time point assessed along the way starting at two weeks into the trial with P-values of at least 0.0001 for both doses at each time point. In order to meet the POISE primary end point, patients had to have a reduction in alkaline phosphatase to less than 1.67 times upper limit normal with at least a 15% decrease from baseline and together with a normal bilirubin.

Close to half the patients in both those groups, 47% in the 10 milligram group, 46% in the 5 milligram to 10 milligram titration group, met the endpoint as compared to 10% in the placebo group. The robustness of the data in this 217 patient Phase 3 trial underscores the ability of OCA to significantly improve the biochemical health of these patients. And as we’ve been previously published and more recently collaborated by the Global PBC Study Group or Supergroup as we’ve called it, achieving a level defined by the POISE endpoint predicts highly significantly improved liver transplant-free survival of patients.

As we’ve previously reported, the current standard of care in PBC Ursodiol or Urso provides an inadequate therapeutic response in up to half of PBC patients. And we believe that the results demonstrated by OCA employees in our previous Phase 2 trials both when added to Ursodiol and as monotherapy support our proceeding to file for approval of OCA as the first Novel drug therapy in PBC in almost 20 years.

We are excited to continue working closely with FDA and EMA to be in position to file an NDA and MAA at the end of this year. We believe we’re close to finalizing a trial protocol with FDA, and plan to initiate our Phase 3 clinical outcomes trial in PBC in the third quarter of this year. Given that we’re seeking accelerated approval of OCA in the U.S. for PBC, this trial is required to demonstrate clinical benefit on an improved liver related outcome, and it will be completed only on a post-approval basis.

Some additional topline results we’ve provided in the press release yesterday, and more data from the trial will be presented in the few weeks at the upcoming 2014 EASL Conference taking place in London in April.

Let me now provide additional details concerning the tolerability and safety profile of OCA observed in POISE. In general, what we’ve seen is consistent with what we’ve reported for our previous Phase 2 trials of OCA and PBC, including results in patients on longer-term OCA therapy for a year and with some patients now on monotherapy treatment for more than four years. Of course, the one consistently observed side effects of OCA in PBC patients is pruritus or itching, the most common sympton of the disease.

Pruritus can also be induced by Urso, the standard of care when patients first begin . So treating physicians will sometime start patients with lower doses and titrate up to a therapeutic dose. Consistent with this, we decided to include a titration arm in POISE that is to see if starting patients below 5 milligram dose and titrating OCA up to 10 milligram at 10 months, in those patients who hadn’t yet met the primary endpoint and are tolerating treatment would result in better tolerability without sacrificing much efficacy.

That’s exactly what we found, In seven patients in the 10 milligram group, 10% – seven patients rather in the 10 milligram group of about 10% discontinued due to pruritus, same proportion as in our previous 12-week Phase 2 trial, but only one patient 1% of total in the titration group discontinued, and did so only after being titrated up to the 10 milligram dose. Virtually, all of the 5-milligram patients who hadn’t met the endpoint of six months were titrated up to 10 milligrams, which suggests that 5 milligrams is a generally well tolerated dose in PBC patients.

Further, we did see a lower incidence of pruritus of a little more than half of the patients in the titration dose group over the entire year as compared to about seven and 10 patients in the 10 milligram group and four in 10 in the placebo group, and this suggests that this titration regime has a better tolerability profile while giving up very little in efficacy.

Another highly encouraging detail, of course, is that as we previously reported, virtually all of the patients who completed the 12-month double-blind phase of POISE opted to continue on in the open label five-year long-term extension phase, which tells us that those who had been taking OCA were generally tolerating therapy well.

PBC patients typically have unusually elevated cholesterol levels, both HDL and LDL, which is associated with the disease. But they've been shown not to be at increased cardiovascular disease risk as compared to the general population. As we saw in our previous Phase 2 trials, patients taking OCA and POISE experienced a modest decrease in HDL, which remained well above the lower limits of normal.

There were no changes in LDL cholesterol in either dose group. Interestingly, in this large cohort of patients, we saw a slight decrease in triglycerides, an effect consistent with FXR activation that we observed in our previous trial in diabetic NAFL patients who had abnormally elevated triglycerides.

Finally, we also saw decrease in VLDL cholesterol. Other than pruritus, the incidence of all other adverse events is not different amongst the three arms of POISE. Serious adverse events, or SAEs, occurred in 22 patients, about 10% of total cohort, and although there were more in the two OCA groups than in the placebo group, none were considered to be treatment related, and there was no apparent pattern between the groups.

Given the interest the 10-K aroused in cardiovascular events in patients taking OCA, I can report there were two cardiovascular SAEs in POISE, one in the placebo group and one in the titration group. And I should also say that with chronic OCA treatment to-date, more than 400 PBC patients with some now on therapy for more than four years, we've never observed a drug related cardiovascular SAE.

It's worth mentioning that the SAEs in POISE appear to be of a typical nature in PBC patients over the course of the year of treatment and there are no overlapping SAEs between the two dose groups. We saw several bone fractures, back problems, and osteoarthritis, varicose vein procedures, et cetera, pretty typical in the patient population that we were studying.

As I mentioned, we will be presenting additional details from POISE, including patient demographics and baseline biochemical status; additional details of the primary and many of the secondary endpoints, including proportion of patients achieving certain pre-specified reductions in alkaline phosphatase and other data. As such, while we welcome your questions, I'm not able to provide any additional information beyond what I've just stated here and what was also included in our press release.

To summarize, it appears that our POISE Phase 3 results are consistent with the effects we observed in our Phase 2 PBC program, which includes patients who have now been on drug for a number of years and in whom we've shown our drug also appears to be safe with a durable therapeutic effect over long-term treatment course.

This is important, given that, assuming OCA is approved of course, will likely become life time second line therapy in PBC patients with either an inadequate response to Urso or inability to tolerate Urso.

This represents the combination of more than a decade of work, but we are not done yet and remain committed to working diligently to bring our new therapeutic option to the market and help improve health outcomes for PBC patients worldwide. I'd like to thank very much all those who participating in our clinical trail together with the investigators and highly capable team at Intercept.

Let me now turn to FLINT and NASH – our NASH program. While this is not the focus of today’s call, we've received questions on some of the information pertaining to our NASH program and the FLINT trial in particular, that we provided in the 10-K on Friday evening.

Before I make any comments about the information we disclosed I want to acknowledge that while it’s unusual for a company to put out additional information from an ongoing clinical trial, we found ourselves in an atypical circumstance in which the early stop of the treatment Phase of FLINT had been announced with limited disclosure made by the by NIDDK, the trial sponsor concerning both efficacy and potential safety concern.

Given the very high visibility of the trial results, and as a results of the company itself have attained after the announcement in January, we felt it was incumbent on us in our 10-K annual update to disclose additional relevant information we recently been able to glean from the NIDDK in the course of the series of interactions. With most of the focus thus far on safety related information, we look forward to being able to supplement what we know with the final set of efficacy and safety results in the not too distant future.

As mentioned in the 10-K, our partners at the NIDDK have committed to providing us with the unblinded final results from the FLINT trial in July this year, as soon as they become available after the completion of the ongoing 24 week observational Phase. This is several months earlier than we previously anticipated and we don't expect to get any additional results prior to the availability of the complete data set.

Once we have the data we will be able to proceed to finalize our Phase 3 program design based on discussions with FDA and EMA, hail and hail of course with whom we've already begun consultation. We're extremely enthusiastic about moving our NASH program forward and anticipate initiating our Phase 3 program in the first half o 2015, assuming of course, availability of sufficient funding.

In the meantime, we intend to initiate a Study of OCA's lipid metabolic effects and NASH patients in the second half of 2014 and are also considering initiating a Phase 2 placebo-controlled trial in pediatric NASH patients. While pediatric NASH has a lower prevalence than the adult form of the disease, it is still highly prevalent and can result in cirrhosis and liver failure in school age children.

We currently anticipate that our NASH Phase 3 program may involve two separate Phase 3 clinical trials. Both will be powered for clinical outcomes, one enrolling precirrhotic NASH patients with advance to bridging fibrosis excuse me and the other would enroll all color cirrhotic patients, including a sizeable cohort with NASH, but also with other chronic liver diseases such as alcoholic liver disease, hepatitis C, viral infection and PBC among others.

Based on commentary from the FDA at the NASH workshop held in September 2013 last year we believe that we could incorporate a planned interim analysis in both of these trials that could serve as a basis for accelerated approval on a surrogate endpoint.

On the pre-cirrhotic patients, this could be histologic improvement after at least one-year of OCA treatment, likely employing a liver biopsy based endpoint similar or identical to the one used in Flint. In the cirrhotic patients, the surrogate endpoint after a similar timeframe could include in the assessment of hepatic venous portal gradient, or HVPG, the same endpoint we use in our portal hypertension proof-of-concept study that recently read out as well as histologic improvement shown on liver biopsy taken simultaneously during the same procedure.

Let me turn now to the safety and information disclosure we made in the 10-K, concerning the cardiovascular events absorbed in the Flint trial. I should emphasize the trial remains blinded so we only have a very limited set of information. As reported as of the end of December 2013, there had been a total of 10 cardiovascular SAEs, which had occurred in seven patients across lipid placebo and OCA groups overall 2.5% of the 283 patients enrolled.

While these apparently occurred in more patients on OCA than placebo the difference in the number of events was not statistically significant and eight of the 10 events were considered unrelated to treatment. In addition, the clinical circumstances of the two unblinded serious cardiovascular events were noted as possibly related led to a conclusion by us and in one case the principal investigator himself, that they were likely unrelated to study drug.

It's important to highlight these cardiovascular events occurred over the course of the trial and the last of them occurred prior to Mid 2013 about seven months before the positive interim efficacy analysis led to the NIDDK's decision to stop the Flint treatment phase early. We take adverse event monitoring and reporting very seriously in all clinical trials testing OCA.

However, based on our understanding of the mechanism of action of OCA as an FXR agonist, our clinical safety experience with our drug, and the well- documented rates of cardiovascular morbidity and mortality in NASH patients particularly in those with Type 2 Diabetes and other cardiovascular risk factors, we do not currently view the low incidence of the cardiovascular events reported in FLINT to be indicative of a safety signal and the FDA has not reported any concern to us.

Both the NIDDK and Intercept have been encouraged by early demonstration of OCA's considerable last efficacy and getting to the final readout from FLINT sooner than anticipated. There's a tremendous unmet medical need for Novel therapy to treat NASH patients, particularly those with more advanced disease, many of whom progress to cirrhosis and are at real risk of liver-related mortality. I would like to take this opportunity to thank again the NIDDK for their sponsorship of the FLINT trial and continued dedication to identifying effective drug therapies to help NASH patients.

As a final comment, some of you may have heard in the past few days that the NIDDK has committed to providing the FLINT data when available in July in response to FOIA, or Freedom of Information Act requests. I would be remiss if I didn't ask on their behalf on NIDDK's behalf that is – not to bombard them with such requests in the meantime because they will not be honored.

I'll now turn off over the call to Barbara Duncan, our Chief Financial Officer, for a discussion of our financial position.

Barbara Gayle Duncan

Thank you, Mark. Good morning, everyone. Please refer to our press release that we issued on Friday for our summary of our financial results for the three-months and 12 month periods ended December 31, 2013. I'll focus my comments this morning on an overview of our financial position as of December 31, 2013. We ended 2013 with 145 million of cash, cash equivalents, and investment securities available for sale on our Balance Sheet.

Based upon our currently expected level of operating expenditures, we believe that we will be able to fund our operations into the third quarter of 2015, which gets us comfortably a past the NDA and MAA filings of OCA in PBC currently anticipated in late 2013. This expected level of expenditures includes all of the studies and the work necessary for the PBC regulatory filings as well as the initiation of the Phase 2 in PSC and lipid trial in NASH patients, and certain pre-commercialization expenses.

However, it would not include additional capital necessary for the anticipated Phase 3 program in NASH patients. While I won't review all of 2013 results we shared in our press release earlier today, let me make a few remarks on the accounting treatment related to periodic reevaluation of our warrants. In connection with some of our pre-IPO equity financing we issued warrants that are classified as liabilities and are adjusted to fair value on a quarterly basis with a change in the fair value being included in our net loss.

The amount included in net loss is a non-cash item as Intercept is not required to expend any cash to settle the warrant liability. The warrant liability is primarily affected by changes in Intercept's stock price during each financial reporting period, which causes the warrant liability to fluctuate as a market price of Intercept stock fluctuates as well as remaining terminal warrants and underlying volatility utilized in the fair value calculation.

In general, the warrant liability for the fourth quarter and the year ended December31, 2013 increased significantly primarily due to the increase in our stock since December 2012, offset by the decrease in the number of warrants outstanding. For the full year 2013, the warrant revaluation expense was $28.4 million. As of the end of this year there is only one tranche of warrant outstanding representing approximately 865,000 shares and the expiration date on those warrants is January 2015.

Therefore, going forward, the warrant liability will be classified as a current liability. Given the substantial increase in the value of our common stock during the first quarter this – of 2013, this warrant liability is also expected to significantly increase as of March 31, 2013.

Let me turn the call back over to Mark.

Mark E. Pruzanski

Thanks, Barbara. And I think we're ready now for some questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Colin Bristow of Bank of America. Your line is now open.

Rachel McMinn – Bank of America Merrill Lynch

Yes, it’s actually Rachel McMinn, thanks for taking my question. Mark a couple of things, can you talk about how much patient exposure you have and specifically on duration, how many patients have been exposed to OCA for one year, two years, and just the broader question of how we should be thinking about extrapolating that safety data from PBC into NASH?

Mark E. Pruzanski

Yes.

Rachel McMinn – Bank of America Merrill Lynch

And then two other questions, just the lipid trial in PBC, is that gating for your NDA filing, and do you have any sense of how much the NASH studies are going to cost when we think about sketching out Phase 3 costs in our model? Thanks.

Mark E. Pruzanski

So thanks Rachel. With respect to the first question which is exposure in PBC patients I don't have the exact breakdown at my finger tips. I can tell you that we have had 19 patients on monotherapy for approximately four years or longer, and a total patient -- PBC patient exposure of over 550 patient years at this point.

We had in our previous, so-called combination PBC trial which was the model for the Phase 3 POISE trial. We had a long-term safety extension that went at least one year and for some patients over 18 months, and that had enrolled about 70 patients, I think over 60 patients had completed the year of therapy.

So, I apologize I don't have the exact numbers at my finger tips, but we do have very extensive safety exposures in the PBC population. With respect to the other question, which was the PBC lipid study that we will be completing this year, we do intend it’s an open label study, we do intend on including data from that trial in the NDA and MAA.

I can turn to Barbara in terms of the cost, but to be frank, we've just as I mentioned in my remarks, we've been sketching out that the Phase 3 program will look like, I think we still have quite a bit of work to do with KOLs and with regulatory authorities to really define these trials, so it would be premature for me to comment about the anticipated costs. I will say though as a placeholder, and I think you yourself are using this number a thousand patients in total. We think that that's an appropriate placeholder to think about and model.

Operator

Thank you. Our next question comes from the line of Jonathan Eckard of Citi. Your line is now open.

Jonathan Eckard – Citi

Well, thank you for taking the questions. So there's more – there's some of the data that's in the two cases that were unblinded, and I'm just not sure if you know, if there's going to be any additional information that could be used, so when you do get it, you can share it with regulators. For example, both of the two blinded cases seem to have kind of missing information, which is probably pretty important in assessing what really happened in both of them, and the one, there is a suspect stroke but then deemed that the person didn't have a stroke, and then the second one seems like the cardiovascular event was diagnosed by the patients’ family…

Mark E. Pruzanski

Yes.

Jonathan Eckard – Citi

And so I'm just trying to understand what kind of information – additional information may be available to you, so that when you do meet with regulators, these can be looked at, at face value rather than kind of speculation?

Mark E. Pruzanski

Yes. Well, thanks, Jon, I appreciate the question. We felt it was necessary given our disclosure to provide at least the Cogent detail in both cases, and I think even what we provided and the underpinning of your question is that the medical history and the clinical circumstances of – in both of these cases would lead to a reasonable conclusion at least it did by us medically that this was unlikely to be drug related. This information is gleaned from fairly detailed case report forms that would be available in the context of review with FDA in both cases.

As I mentioned, we have not gotten any expression of concern from FDA about any of the SAEs in even in FLINT. So I'm confident that when we do have the complete data set, which will include of course, the unblinded remaining safety data that we'll be able to have a fulsome discussion with FDA, with all of the relevant details.

Jonathan Eckard – Citi

Great. And then just a quick second question on the PIVENS trial, the CRN, and I believe it probably consists of a similar group of PI’s who are on the FLINT trial. When they did their adjudication of the data, especially the cardiovascular events from that trial to the final analysis, was there much change in those events, because again, this is a pretty tight group if I'm not mistaken, I'm just trying to understand like what's happened historically with some of the adjudication of events and so on and so forth from PIVENS, and what therefore may or may not come out of the final analysis for FLINT?

Mark E. Pruzanski

Yes, it's a good question. I don't know the answer to that. We only know what has been published, and there is for PIVENS, there are supplemental data tables, which include more detail on the AE's that occurred in that trial. They have a bit of a…

Jonathan Eckard – Citi

Hello, hello…

Barbara Gayle Duncan

Ladies and gentlemen, please standby your conference will begin momentarily.

Jonathan Eckard – Citi

Hello.

Barbara Gayle Duncan

John, we are just waiting for Mark to rejoin the call.

Jonathan Eckard – Citi

Oh, okay, sorry. I [indiscernible].

Barbara Gayle Duncan

Sorry.

Jonathan Eckard – Citi

Well, if he doesn't get back, I mean I think he's answered most of my questions and congratulations on all the updates, and I'll pass it back so somebody else the chance to ask questions.

Barbara Gayle Duncan

Thank you so much Jon, I appreciate it. Just everyone, the operator is now redialing Mark in, just a moment.

Operator

Mark has rejoined.

Jonathan Eckard – Citi

I apologize. My cell phone dropped, but I just got a couple e-mails a couple other people were dropped as well. I was on hold but anyway, right back, where was I lost?

Barbara Gayle Duncan

Hi, Mark. You were talking about the AE's in the Piven study.

Mark E. Pruzanski

Yes and just the adjudication of those AE's that we can't know, I – we can't know, I think I mentioned I don't know if I dropped before this but if you look at the supplemental tables published for Piven’s, there's a break-out of clinical events and outcomes that are separate from the other AE tables and the other thing I was mentioning is that, we want to stress that we are not, it's not appropriate to directly compare two different clinical trials but we did want to highlight that Piven’s excluded diabetic patients whereas FLINT had more than 50% on diabetics who of course are defensively at more cardiovascular risk and morbidity and mortality and other all cause mortality.

Jonathan Eckard – Citi

Thanks Mark. I'll let it be, thank you.

Operator

Thank you. Our next question comes from the Jim Birchenough of BMO Capital. Your line is now open.

Jim Birchenough – BMO Capital Markets

Hi, guys, congratulations on the POISE data and just a few follow-up questions. Just Mark could you maybe first provide some context for what type of CV event rate we typically see in these type of NASH patients maybe looking at Piven’s and other studies and then second I'm trying to get a better sense of what the timeline is for interaction of FDA following the 10-K disclosure and the POISE data.

Could you maybe sketch out when is the next time point you'd talk to FDA and get an updated sense from them on how they might think about this. And then final question just want to get a better sense of when you look at designing your Phase 3 trials, would you expect to try and exclude some upper bound risk for CV events in the way that companies likes Orexigen have had to do and would you have some interim time points to do that or would we have to wait for the final Phase 3 completion to get a sense of relative CV risk? Thanks.

Mark E. Pruzanski

Yes, sure. So to your first question, which is – what's the normal background cardiovascular morbidity/mortality rate, we did report in the 10-K, a recent U.S. study showing over a 10-year follow-up period over 50%, in fact, totaling 57% mortality in diabetic NAFL patients, so not even necessarily patients who had NASH, but just the broader spectrum of NAFL, as compared to non-diabetic NAFL patients who had a 27% mortality risk.

So, if you take a queue from that, you've got a 5% annual mortality. Now that's all cause, but the primary cause and the general NAFL patient population especially diabetic population would be cardiovascular. There's another paper I saw recently showing in NAFL patients just over 1% annual cardiovascular event rate.

So I think that that gives you the kind of context you are looking for. With respect to FDA interactions on the program, we don't comment on specific interactions and it's difficult to predict. We anticipate having a series of interactions with them. We don't have an ID filed, for example, so that's the first order of business for NASH, I mean and NIDDK does. And we will be talking to them and also EMA this year. And as I mentioned in my remarks we anticipate getting – going on a Phase 3 program in the first half. So, we think it will take about a year.

Of course, once we have the unblinded data set in hand, we'll have a much better leg to stand on and going in and reviewing it with them and sort of nailing down the Phase 3 program. Your third question about excluding patients at more cardiovascular risk, I can't comment on that. I mean, I really think we need to take a look at the data.

And as I said, given this event rate in this particular population, and given what we know about our drug, we're not particularly concerned and I would highlight the fact that we do, we have put a stake in the ground that we initially would like to focus on patients with more advanced disease. And we do know that patients who are – have advanced fibrosis or already established cirrhosis are at much more relative risk of liver related morbidity and mortality.

So I think that the – that will also be taken into consideration in terms of the patients we choose, so I'll leave it there.

Unidentified Analyst

Great. Thanks, Mark.

Mark E. Pruzanski

Thanks, Jim.

Operator

Thank you. Our next question comes from the line of Alan Carr of Needham & Company. Your line is now open.

Alan Carr – Needham & Co. LLC

Hi, thanks for taking my questions. Wondering if you could give us a few more details about the lipid metabolic trial that you plan for later this year and also the pediatric NASH too?

Mark E. Pruzanski

I’m sorry, Alan, I missed part of that question.

Alan Carr – Needham & Co. LLC

Is there – I was hoping you could give us more details on a couple of the trials you plan this year. One of them is the lipid metabolic trial for OCA. If you could give us details on that when it sounds like it will be relatively quick and the other and I'm wondering if you can comment on the pediatric trial as well that you're contemplating.

Mark E. Pruzanski

Yes, so the lipid so as you know, we are currently conducting a lipid metabolic study in PBC patients and you can go to clintrials and get an idea of all of the different detailed lipid and Lipoprotein parameters we're studying there and I think that with the NASH trial we actually recently had an add Board with an impressive group of NASH and lipidologist KOLs who are helping design a study in NASH.

I think all I can say right now is that this will be a more complex study. We're going to be asking questions like what are the effects of OCA in NASH patients not on statins, what happens if you add a statin, et cetera, so that's obviously a point of interest there and not so much in PBC patients and we will likely look at additional parameters not just lipid parameters, but also inflammatory parameters because that's also a very key component of cardiovascular risk.

That said we need David Shapiro and his team need a little bit more time to finalize the design of the study and it will be starting in the second half and I really do not anticipate having data from it until next year. It will take some time to get up and going.

With respect to the pediatric NASH trial, this is something that we've been approached on and are very interested. And I want to stress that this is something that is a potential, we haven't decided definitively to do it. We need to discuss more with the proposed PI, but obviously there's a real unmet need in this population as well.

Alan Carr – Needham & Co. LLC

Great, thanks very much,

Mark E. Pruzanski

Thanks, Alan.

Operator

Thank you. Our next question comes from Akiva Y. Felt of Oppenheimer. Your line is now open.

Akiva Y. Felt – Oppenheimer & Co., Inc. (Broker)

Hi Mark. Thanks for explaining the rationale about disclosing the CV events from FLINT. I'm just wondering when you received a full data set from the NIDDK in July what's going to be the plan disclosure of data from that point going forward. Is the plan still to wait for ASLD to see the rest of the data or will there will be some periodic disclosures in between and then I have a follow-up question after that.

Mark E. Pruzanski

Well thanks and this has been the source of lot of speculation. We – I mean just as we've put out top line information from the trial which we have an obligation to do NIDDK understands that once we get the complete unblinded data set we will need to put out top line results very quickly and then that is our intention.

And frankly, we've now heard that there have been FOIA requests and there have been in response this FOIA request NIDDK has or at least someone at NIDDK has communicated that the data set will be available to those making the request as well, so it's I think we are going to need to spend some time now talking to NIDDK about the appropriate dissemination of the data.

The intention still I mean the next key scientific meeting and which it would make sense for NIDDK and the FLINT investigators to present their data to the scientific community is still AASLD in Mid November this year and I believe that would remains the intention, which I think is completely appropriate.

Akiva Y. Felt – Oppenheimer & Co., Inc. (Broker)

Okay thanks. And then so you also mentioned once you have the FLINT data in hand you'll go to the FDA and EMA to finalize the Phase 3 trial design. So I'm just wondering if you could maybe tell us what it is you're looking to see FLINT may be kind of two or three type pivot data points that will that could impact the Phase 3 design. And is there – is there anything about the tentative trial design in place that you could tell us about? Thanks.

Mark E. Pruzanski

Yes, I mean – I'll mention one thing but I don't want to guess what the data set will tell us I think that we have keen interest. We know obviously that the drug was highly efficacious in meeting the specified primary endpoint, which was the two point improvement in NAFL activity score with no worsening of fibrosis.

I think that for example, that looking at the individual components there, including histological not just the individual components of the NAS, but also NASH resolution itself looking at fibrosis, looking at what's going on in the later stage patients I think that will inform or could inform our plans especially in the more advanced patient.

And I mentioned that, it think its public out there because FDA made a comment about this the workshop and Giliad also made public comments that HGPG, hepatic pressure gradient is likely to be acceptable surrogate endpoint in cirrhotic patient I think it will be interesting to sort of see how the data might inform in addition to HVPG, histologic endpoint and that will be subject of some interest in discussions with the regulators.

But beyond that, I think we just have to wait to see what the data set is and how our discussions go with FDA. And in terms design studies, we mentioned I think as much as we can, we've speculated about and other companies have also speculated about potentially acceptable surrogate endpoints.

So in addition to HVPG, we have in the pre-cirrhotic patients histologic endpoint which could be either similar to FLINT or it could be a little bit more to the left as I call it, which is histologic resolution of NASH, the secondary endpoint in FLINT. And then I think the other area of great interest to us and other companies into FDA are the non-invasive modalities that we and others will incorporate in our trial.

So we have fiber scan, which is approved now, not been in the market in Europe for a few years and now is in the U.S. market and has a very high sensitivity specificity of basically giving you the answer cirrhosis or no cirrhosis and I think we’d be interested employing that as a supportive modality in our trials and then there are other very interesting surro markers of fibrosis and NASH and quantitative liver function tests.

Akiva Y. Felt – Oppenheimer & Co., Inc. (Broker)

Great. Thanks for the additional color and congrats again on the positive PBC data.

Mark E. Pruzanski

All right.

Operator

Thank you. Our next question comes from the line of Jim Molloy of Summer Street Research Partners. Your line is now open.

Jim Molloy – Summer Street Research Partners

Hey, thanks for taking my questions. And Happy St. Patrick's Day you guys as well. Just a quick question on the – looking at the SAEs versus the CV SAEs and the two trial and 10 in the NASH trial and two in the POISE, and NASH at 25 milligrams and POISE at 5 milligrams to 10 milligrams, is there anything you’ve read into the dosing or is the disease state or the co-morbidities of the two patient populations that may be driving the higher AE, SAEs in the NASH trial?

Mark E. Pruzanski

Yes, thanks, Jim. I really, it’s apples to oranges, right. It’s a very different patient population. As I mentioned, the PBC patients are hyperlipidemic, but don't appear to have increased cardiovascular risk compared to the general population. And I think as I – not just the cardiovascular SAEs, but all of the AEs we saw in the POISE trial and the PBC patients were sort of typical as expected in a population like this over the course of the year.

There is a higher dose, the 25-milligram dose that we used in the FLINT trial and the NASH patients, but also keep in mind that the BMIs on these patients especially in the U.S. tend to be quite a bit higher just to give you color on that, in our previous six week diabetic NAFL study the mean BMI was 36 of the patients versus 27 in our previous Phase 2 PBC trial I think I recall that correctly.

So and on a mgs per kg basis the gap is not that wide, but I wouldn't want to speculate on sort of any kind of dose effect here. And frankly, again I'll say this that we obviously need to see what the unblinded data look like, but given all of our understanding of the mechanism of action of this drug and in the normal background rate of cardiovascular morbidity in a population like this in FLINT, we're not concerned that there's any kind of signal here.

Jim Molloy – Summer Street Research Partners

Great and then on the PBC data congratulations on the very positive data that you presented.

Mark E. Pruzanski

Thank you.

Jim Molloy – Summer Street Research Partners

Any additional color from the FDA, these are obviously surrogate endpoints, EMA is on Board, any additional color from the FDA, should we expect these endpoints will be conformable for approving?

Mark E. Pruzanski

Good question. As I've always been guiding, this is an unprecedented surrogate endpoint and ultimately will be a review issue, but I will say that I’ve state publicly in the past that FDA was very enthusiastic about our contact our sponsorship of the PBC Supergroup that I discussed during my remarks.

They now have seen the more relevant final data from over 6,000 patients in the database and the correlation of our POISE endpoint with long-term with liver transplant-free survival and was reported that on our specific endpoint, the P-value was 10 to the minus 34. It doesn't get clearer than that and I'd humbly like to think that we've done everything possible to provide sufficient evidence to support the bar which is reasonably likely to predict clinical benefit. And I think, I hope that FDA feels of the same way.

Jim Molloy – Summer Street Research Partners

Thank you for taking the questions.

Mark E. Pruzanski

Thanks.

Operator

Thank you. Our next question comes from the line of Jim Birchenough of BMO Capital Markets. Your line is now open.

Jim Birchenough – BMO Capital Markets

Hi guys, I just wanted to follow-up on a couple things. One just in terms of the adjudication Mark do you expect to have some cardiovascular or cardiologist adjudication or is this just going to remain adjudicated by the FLINT investigators? And then just second question, can you remind us whether we seen effect of OCA on inflammatory cytokines and CRP, some of the important markers for CV risk? Thanks

Mark E. Pruzanski

Yes, thanks, Jim. The answer to your first question is, we certainly would have an interest in that. I believe that most of the people involved in the FLINT trial understandably are Hepatologiests, and we've learned a lot in our discussions with cardiologists and especially with lipidologists, and we will continue those discussions, right?

And we are absolutely committed, per our desire to do this detailed lipid metabolic study in NASH patients. We're absolutely committed to understanding to the level possible mechanistically what's going on and what the clinical implications are of the lipid metabolic effects we see. So certainly, when we have the FLINT data in hand, we will be interested in reviewing it and having it adjudicated by cardiology and lipidology.

With respect to your question about inflammatory markers, yes, we know that I mean, one of the important mechanisms of action of FXR in both the liver and elsewhere are the anti-inflammatory effects. These have been extensively published on and we do have in our previous Phase 2 trials evidence that, for example, CRP, C reactive protein does decrease on OCA and, of course, this is a very important marker of inflammation and cardiovascular risk.

In fact, I believe I read a recent paper that if you were on a statin and you get an LDL decrease, you actually don't get decreased cardiovascular risk unless your CRP also goes down concomitantly. So yes, that's why I mentioned inflammatory markers and we have seen them go down with the OCA therapy.

Jim Birchenough – BMO Capital Markets

Great. Thanks, Mark.

Operator

Thank you. I'm showing no further questions in the queue. I'd now like to hand the call back over to Mark Pruzanski for any closing remarks.

Mark E. Pruzanski

Yes, thanks. Again, I want to thank everyone who listened in on this call this morning. This is really an absolutely thrilling time for us. I mean, I started this Company over 12 years ago and this is the Phase 3 result is really realization of a long, that's been a long time coming. And I really believe that this sets us on the path to getting OCA forward to filing for approval and hopefully to the market and to patients.

So I want to thank everyone for first and foremost the patients who have participated in our trials all of the investigator study coordinators and everyone else involved out there in our trials and, of course, my extremely capable team want to thank Senthil, Barbara, and David Shapiro listening in and everybody else in San Diego, Italy, et cetera. It really is a special day for me and we look forward to continuing to work hard to execute as we have to bring OCA forward, so thank you all.

Operator

Ladies and gentlemen thank you participating in today’s conference. This does conclude today’s program. You may all disconnect. Have a great day, everyone.

Mark E. Pruzanski

Thank you.

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