Intercept Pharmaceuticals (ICPT) Mark E. Pruzanski on Q4 2015 Results - Earnings Call Transcript

Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT)

Q4 2015 Earnings Call

February 23, 2016 8:00 am ET

Executives

Mark Vignola - Director of Inverstor Relations

Mark E. Pruzanski - President, Chief Executive Officer & Director

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Barbara Gayle Duncan - Chief Financial Officer, Secretary & Treasurer

Rachel L. McMinn - Chief Business and Strategy Officer

Analysts

Matt M. Roden - UBS Securities LLC

Michael J. Yee - RBC Capital Markets LLC

Alan Carr - Needham & Co. LLC

Ritu Baral - Cowen & Co. LLC

Joel L. Beatty - Citigroup Global Markets, Inc. (Broker)

Joseph P. Schwartz - Leerink Partners LLC

Liisa A. Bayko - JMP Securities LLC

Brian P. Skorney - Robert W. Baird & Co., Inc. (Broker)

Operator

Thank you for joining the Intercept Pharmaceuticals 2015 Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal report, Intercept management will open the lines for a question-and-answer period. Please be advised that this call is being recorded at the company's request and a webcast of this call will be archived on the company website for two weeks from today's date.

At this time, I would like to introduce Dr. Mark Vignola, Intercept's Director of Investor Relations. Please go ahead, sir.

Mark Vignola - Director of Inverstor Relations

Good morning and thank you for joining us on today's call. We're reporting our financial results for the year ended December 31, 2015.

Before we begin, please remember we will be making certain forward-looking statements on today's call, including statements and forecasts regarding our future financial and operating performance, anticipated timelines for the potential approval and commercial launch of obeticholic acid, and our regulatory, clinical, and commercial plans, goals and estimates, as well as other statements which relate to future events.

These statements are based on 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 Risk Factors sections of our most recent Annual Report on Form 10-K, and Intercept's other filings with the SEC. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events, or otherwise.

The format for today's call will include opening remarks from Intercept's management team, and then we'll open up the call to take your questions.

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

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thank you, Mark, and thanks to everyone for joining us on our conference call and webcast. I'm going to provide you with an update on the development of our lead product candidate, obeticholic acid, or OCA. Lisa Bright, our Chief Commercial and Corporate Affairs Officer, will make a few comments on our ongoing commercial preparations. Finally, Barbara Duncan, our Chief Financial Officer, will then discuss our financial results and cash position.

2015 was a pivotal year for Intercept, marked by several notable accomplishments, including the completion of our NDA and MAA filings for OCA and our lead indication, PBC, the build-out of our global commercial infrastructure, FDA's designation of OCA as a breakthrough therapy in NASH with fibrosis, and the initiation of REGENERATE, the first-ever Phase 3 NASH trial.

Starting with our PBC program, in June we announced that we completed the submission of our applications in the U.S. and Europe for marketing approval of OCA for patients with PBC inadequately treated by or intolerant of standard first-line treatment URSO. Our application was granted priority review by the FDA in August. In December, the FDA notified us that the PDUFA date would be extended by 90 days from the end of February to the end of May.

2015 also marked the year that we initiated the transition from a development-stage company to a commercial-ready organization focused first on the U.S. and a subsequent European launch. Lisa will provide a few comments later on in the call on the work that our commercial team is doing.

2015 was also a pivotal year for our NASH program. In January, we received breakthrough designation for OCA for the treatment of NASH patients with liver fibrosis; to our knowledge, the largest such designation ever. Following extensive discussions with FDA and EMA, we announced a few months later the design of REGENERATE, the first-ever NASH Phase 3 registrational trial in non-cirrhotic NASH patients with advanced fibrosis, a serious chronic liver disease with no approved therapies.

Finally in September, we announced the initiation of REGENERATE. We believe this is an important milestone for NASH patients, and for Intercept as a company, in advancing our vision of developing important therapies for non-viral, progressive liver diseases.

Along with REGENERATE, we announced in December the initiation of the CONTROL trial, which will evaluate the effect of OCA in combination with statin therapy on lipid metabolism in patients with NASH. Developing a broad and comprehensive NASH clinical program remains a key focus for us, and the CONTROL trial is an important next step in this strategy.

In addition to our efforts in PBC and NASH, 2015 was the year in which we expanded the disease areas we're exploring for OCA, marked by the initiation of trials in primary sclerosing cholangitis, or PSC, and biliary atresia. We also advanced our second compound, INT-767, a dual FXR and TGR5 agonist, into the clinic in November of 2015.

I believe that our accomplishments throughout the year have laid a solid foundation for an exciting year ahead as we move towards our first product approval.

Turning to 2016, this is a year of execution for the company, marked primarily by our anticipated PBC approval and launch, and further advancement of our global NASH development program. Starting first with the PBC program, obviously first and foremost on the horizon is our FDA advisory committee planned for April 7 followed by our PDUFA date of May 29.

I'd like to touch briefly on the announcement we made in December regarding the FDA notification of a 90-day extension on our PDUFA date. Just to reiterate, the extension was the result of FDA's request to us for additional clinical data analysis based on our completed studies with no new clinical studies requested. We maintained a very productive and constructive relationship with the FDA and look forward to continued interactions with the agency over the coming weeks as both the Intercept team and the agency prepare for the planned advisory committee meeting in April.

For our European marketing application, our regulatory review continues. We anticipate marketing approval near year-end with the European launch thereafter. As such, we do not anticipate ex-U.S. OCA revenues until 2017. As we continue to move OCA through the regulatory process, our commercial team is hard at work preparing for a best-in-class launch of OCA and PBC. As mentioned, Lisa will provide some color on the team's activities to date and key next steps as we move towards our anticipated launch.

This year will also be a year of NASH program execution for Intercept. As I mentioned a few minutes ago, REGENERATE was initiated in September. Our team is focused on getting study sites up and running, with plans to target up to 300 sites across the U.S., Europe and other Western countries.

We'd like to remind you that the screening process for any trial in NASH with a biopsy endpoint is fairly lengthy. In REGENERATE, patients must go through initial screening, scheduling of a biopsy, reading of that biopsy sequentially by independent central pathology reviewers to confirm NASH with stage 2 or 3 fibrosis before finally being randomized. This process is consistent with what you'd expect in a Phase 3 trial with a biopsy-based primary endpoint. While we know that you're eager for an update on our anticipated enrollment timeline, it's simply too early in the study to have sufficient visibility on enrollment at this time.

In the meantime, suffice to say that, as the investigator meetings we've held in the U.S. and Europe, as well as the large number of direct interactions we've been having with sites around the world, there's been tremendous enthusiasm for involvement in the trial. We are meeting that enthusiasm with all the support we can muster, including the creation of a dedicated trial website at www.nash-study.com, patient advocacy group, outreach and other initiatives.

As I mentioned earlier as well, our Phase 2 control trial, designed to prospectively evaluate the effects of OCA on lipid metabolism and the impact of adding statins is currently enrolling patients. The goals of this trial are to evaluate the impact of varying doses of OCA on LDL and lipid metabolism, and to investigate whether low doses of statins added to OCA therapy adequately control LDL, consistent with the previously reported data from a subgroup of patients in the FLINT trial, who were started on a statin during the course of treatment. We're currently also in the planning stages for additional NASH studies, including a NASH cirrhosis study and a non-invasive technology study.

I'd now like to turn the call over to Lisa Bright, our Chief Commercial and Corporate Affairs Officer, for a few comments on our commercial efforts.

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Good morning. Thank you, Mark. So, as Mark mentioned earlier, 2015 was a pivotal year for Intercept from a commercial perspective. We assembled a really top-notch organization in both the U.S. and in the EU.

We're really excited about the work that the commercial team has done so far, including detailed analysis to help us not only understand how PBC patients are treated, but also how many PBC patients there are, where they're located, and which physicians are caring for them. At the same time, we've gained insights on key challenges that we face for marketing OCA and PBC, and have developed strategies from both a medical affairs and a commercial standpoint to address these challenges head on.

From an infrastructure perspective, in October, we completed the hiring of 45 territory business managers in the U.S., a majority of whom bring deep experience in the liver disease space. We also appointed 11 experienced regional and country general managers across 17 European countries, including UK, France, Germany, Spain, Italy and also Canada.

Thus far in 2016, our U.S. team has continued their efforts, both internally and in the field, and is taking full advantage of the extra time granted by our 90-day PDUFA extension. With this time, our U.S. team has been able to reach more community GI physicians prelaunch than we would previously have been able to do, and as you know, they treat most of the U.S. PBC patients. So it means that we've been able to better understand their PBC treatment practices.

We're also initiating PBC diseased state speaker programs to increase general awareness about the disease and the current treatment approaches. We recently conducted speaker training for these disease programs with over 70 healthcare practitioners in Dallas. Finally, we're working to (10:23) prelaunch logistics and coordination, with the goal of making sure that every part of our organization is stress test and ready to execute upon approval.

In Europe, we're planning for a late 2016 approval, with our commercial launch to follow thereafter. Our ongoing efforts include holding prelaunch readiness reviews with our early launch countries, conducting payor advisory boards to help us understand differing health technology assessment requirements between the countries, as well as the detailed health economics to support those submissions, and also working to ensure our distribution network is in place well in advance of approval.

We look forward to sharing more information with you about all of our commercial readiness later this year. And with that, I'd like to turn things back over to Mark.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thank you, Lisa. As many of you know, Barbara Duncan has been by my side for many years. She led the company's IPO and has been responsible for most of the billion dollars Intercept has raised, over half of which in 2015 alone. Just last month, we announced that Barbara would be leaving Intercept. With the need to address the company's growth into a global commercial organization, we've decided to bring in a new CFO with extensive experience in the financial management of such a company.

Barbara is fully committed to facilitating a transition and will remain the CFO of the company through midyear, with a commitment to provide whatever consulting services and time we need to ensure the smooth onboarding of a new CFO. I'd like to thank Barbara personally for her time and service in helping build Intercept into a truly global company.

With that, I'll turn things over to Barbara to discuss our financials.

Barbara Gayle Duncan - Chief Financial Officer, Secretary & Treasurer

Thank you, Mark, and good morning, everyone. Please refer to our press release issued earlier today for a summary of our financial results for the full year ended December 31, 2015.

We ended the year with $628 million of cash, cash equivalents and investment securities available for sale. Our detailed financial results are contained in our press release issued earlier this morning. Our 2015 non-GAAP adjusted operating expense was approximately $196.1 million. This amount excludes non-cash stock-based compensation expense of $34.2 million and depreciation expense of $1.7 million.

For the fourth quarter 2015, we reported non-GAAP adjusted operating expenses of $76.6 million, which excludes non-cash stock-based compensation expense of $12.1 million and depreciation expense of $600,000. Please see our press release from early this morning for a reconciliation of our historical non-GAAP adjusted operating expense to our GAAP operating expense.

The increase in our expenses in 2015 was a result of infrastructure buildout, supporting not only our general corporate activity but also our pre-commercialization activities in the U.S. and internationally and expansion of our research and development efforts. For the full year 2016, we are guiding for adjusted operating expense in the range of $360 million to $400 million, which excludes stock-based compensation and other non-cash items.

These expenses will support the pre-commercialization activities of our U.S. and international teams and commercialization expenses anticipated post approval. They will, in addition, support a growing clinical program that includes a broadening NASH program, including the REGENERATE and CONTROL trials, continuation of the PBC outcomes and long-term safety extension trials, Phase 2 trials in PSC and biliary atresia; as well as our Phase 1 program for our next clinical candidate, INT-767.

We know that you'll be updating your models to reflect our new operating expense guidance, and you should expect that our spend would be somewhat higher in the second half versus the first half with the increased activities related to the planned U.S. commercial launch following approval.

While we are not providing sales guidance at this time, we want to remind you of the following. Given the 90-day extension of our PDUFA date, it is reasonable for you to model initial revenues starting in June. Ex-U.S., we do not expect revenues until 2017. Adjusted operating expense is a non-GAAP financial measure. We anticipate that stock-based compensation expense will represent the most significant non-cash item that it excluded in adjusted operating expenses as compared to operating expenses under GAAP.

With that, I'll turn it back to the operator for questions.

Question-and-Answer Session

Operator

Thank you. Our first question comes from Matt Roden of UBS. Your line is now open.

Matt M. Roden - UBS Securities LLC

Great. Thanks. Good morning. Thanks for taking the question. I just want to start by congratulating Barbara for a great run and getting the company to this point, and best of luck in your future endeavors. Maybe I can start with a question on the upcoming advisory committee panel. When you talk to your clinical and regulatory consultants, what do you anticipate would be the biggest debates over the approvability of this drug in PBC?

And I guess related, can you just talk about what you're doing to best position the data in front of the adcom? I'm sure that this is the biggest focus for you guys at the moment and that you're spending a lot of time on it. I just wanted to see to what extent you can bring us under the tent and talk about the flex points? Thanks.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Sure. Thanks, Matt. You're right. This is really the focus of the company with respect to getting OCA-approved in the U.S. As I've mentioned in the past, we expect the main focus, frankly, to be the surrogate endpoint that will serve as the basis for accelerated approval. This is, as you know, an unprecedented endpoint in this disease. There hasn't been a drug after URSO in the last 20 years or so.

With respect to providing evidence in support of the endpoint that we used in Phase 3 being reasonably likely to predict clinical benefit, the bar for accelerated approval, we believe we have really overwhelming evidence starting with the fact that, as you know, there are two – not one but two – gigantic clinical databases, the Global PBC Study Group and the UK-PBC Group, both of which published in the last couple years showing with a combined total of over 10,000 PBC patients in North America and Europe that alkaline phosphatase on its own, bilirubin on its own, and the two combined specifically defined as our Phase 3 endpoint predict long-term liver transplant-free survival. So we feel that this evidence from these two independently built and published databases definitely provide the evidence in support of the surrogate.

And that said, as you know, we, like any other responsible company, have been preparing intensively for any and every kind of question that could come to us from an expert panel. We are, as I alluded to in my comments, we are working very constructively with the GI Division at FDA to prepare for the adcom and of course the 90-day extension PDUFA has given both of us additional time to do so. So, I think that the team will be extremely well-prepared for April 7.

Matt M. Roden - UBS Securities LLC

Great. Thanks for that color. Maybe if I could ask one follow-up for Lisa. Lots of factors can go into how a product launch gets out of the gate. In my mind, there's some of the issues that you raised on your prepared remarks regarding the extent of the unmet medical need, the pent-up demand, physician awareness, comfort with the product profile, et cetera. But I wonder if you might focus in a little bit on access and coverage. I think if you look across the industry, one of the hallmarks of recent drug launches has been very significant barriers to access in some cases. I guess, can you just talk about how you plan to address these barriers? What needs to be done from your perspective? What can you control to maybe facilitate prior authorizations or just ease that process so that the launch trajectory itself best represents the underlying demand for the product?

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Yes. Thanks, Matt. So I mean, I think we talked about this before when we had our meeting (19:21) before Christmas about the fact that we've hired a really strong team here in the U.S., managed markets team, who've got significant experience in launching and gaining coverage for specialty therapies with both the private and the public payers. So that team has been very focused on doing extensive payor research with both the national and the regional payers to ensure that we understand how payors are going to cover and reimburse the patients with PBC – with OCA. So, things are progressing well. I think the payors really understand that there is a significant unmet medical need for this. And as you would expect, those conversations are ongoing.

Matt M. Roden - UBS Securities LLC

Great. Thanks very much for taking the questions.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thanks, Matt.

Operator

Thank you. Our next question comes from Michael Yee of RBC Capital Markets. Your line is now open.

Michael J. Yee - RBC Capital Markets LLC

Thanks for the question. I had two questions. One was on NASH. You described and recently announced the initiation of the lipid study. I just wanted to understand, if you can go back and explain, I guess, a specific endpoint: what you would view as a positive outcome? And then the timing of enrollment, the timing of data, whether we get data later this year?

And then the second question actually was for Barbara. Thanks for the guidance on OpEx. $350 million [sic] $360 million (20:47) to $400 million versus $629 million [ph] $628 million (20:49) in cash, can you just describe how you're thinking about your cash options, I guess, a year from now, or thinking about that for next year? What are your different alternatives and would you ever consider an EU partnership or how should we be thinking about that? Thanks.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thanks, Mike. I'll take the first question and then hand it to Barbara. So, with respect to the CONTROL study, just want to reiterate there's a dual objective of the study. First, we want to demonstrate prospectively that adding a standard statin therapy, which is recommended in any case by AASLD and EASL in NASH patients, can adequately nip the LDL increase that we see with OCA in the bud and be safely combined with OCA, again replicating what we demonstrated, what was demonstrated in the FLINT study with data that were (21:44) presented last year. The second objective is to do a detailed study of the lipid metabolic effects, so subfraction analyses, for example, with respect to cholesterol and other lipid analogs (21:58).

With respect to timeline, I mean, obviously this is a much smaller study than REGENERATE so it will read out before REGENERATE. But – as I mentioned in my remarks, there's really a fairly lengthy screen-in, lead-in process here with biopsy-proven patients. And so it's just too early to provide you with visibility at this stage. When we do have adequate visibility, we'll definitely come back to you with a more concrete timeline.

Barbara Gayle Duncan - Chief Financial Officer, Secretary & Treasurer

All right. And Mike, thank you. It's Barbara. So yes, as you indicated, we have given out the guidance up to $360 million to $400 million and our cash balance of $628 million. And so the question is, what sort of financing opportunities would we have? And as you know, as biotech companies, we're always looking at our cash and making sure that we're using it prudently and investing in the right assets. And we don't give out specific guidance as to when or where or what types of financing alternatives we would look at.

I think in terms of the partnership that you indicated for the EU, as we indicated we did make a substantial investment in this current year in 2015 but building out internationally and so I think that we believe we are in a good place in terms of being able to launch this particular product on our own and that's been our strategic vision for a while now.

Michael J. Yee - RBC Capital Markets LLC

Thanks.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thanks, Mike.

Operator

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

Unknown Speaker

Hi. This is Brian (23:38) on for Jonathan. Just two questions. One on the CONTROL study. Are there any interim data points that could be presented, for example, a transition into the last 12-week portion or when patients have transitioned to the statin expansion phase? Additionally, if you guys could talk about the fact that there hasn't really been any visible engagement by large biopharma in NASH development. And based on your knowledge of what's being developed today in NASH, what assets are currently in the hands of large pharma? Thanks.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Sure. Thanks, Brian (24:14). I'll take the first question and hand over to Rachel McMinn for the second question. So, with respect to the CONTROL study, the answer is no. There's no interim endpoint. This is a 16-week study, 80 patients, and so we're just going to – we're going to wait for the results of the study to come in before announcing anything, and with respect to competitive landscape...

Rachel L. McMinn - Chief Business and Strategy Officer

Yes. So, thanks for the question. There are a number of companies, most pharmaceutical and large pharma companies, as well as large biotech, have stated certainly a strategic interest in NASH but, as I'm sure you're aware, that the field overall is extremely early. Most of the products are either preclinical or just going into the clinic now, so there's not been a lot of data. There's a few exceptions, right, with – Gilead has talked about simtuzumab and we're still awaiting results of that Phase 2b study later this year from the two-year endpoint, but otherwise everything's very early. Nothing with any real proof-of-concept data that you can hang your hat on.

Unknown Speaker

Okay. Thanks a lot.

Operator

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

Alan Carr - Needham & Co. LLC

Hi. Thanks for taking my questions. A couple of them. One of them, can you talk a bit about your plans with the NASH cirrhosis trial? Any updates on timing for that? Maybe your discussions with the – updates and discussions with the FDA and what that might look like. And then also, you have a number of investigator-initiated trials, or some of them, that look like they're going to start. I wondered if you can comment a bit on the strategy there. Thanks.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Sure. Thanks, Alan. With respect to the NASH cirrhosis study, we are in play right now with the regulatory authorities, and we have increasing crystallization of what the study is going to look like. Obviously, a big unmet need in NASH cirrhotics. But at this point, all I'm prepared to say is that we're in the planning stages. We do, by the way, anticipate using hepatic venous pressure gradient, or HVPG, as a primary endpoint in the NASH cirrhotics.

You might recall that approximately two years ago, we read out on a small proof of concept study in alcoholic cirrhotics where we demonstrated the ability of OCA to lower – reduce HVPG in relatively short-term, one-week to 10-day therapy. So the idea of our longer term in this study, in the NASH cirrhosis study, would be to demonstrate the same. However, it's too early right now to give you visibility on study start. We are committed to doing it, to planning it, and we'll come back to you at a later date.

With respect to IITs, yeah, there have been IITs conducted in the past. There are a couple ongoing. And there's definite interest in conducting IITs, but at this point, I don't have an update for you on any specific IITs that are coming.

Alan Carr - Needham & Co. LLC

I know you don't want to comment, or it didn't look like you want to give much resolution on time for the cirrhosis trial, but that might – might that start this year even? Or...

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah, sure. It's possible, but I'm not committing to it.

Alan Carr - Needham & Co. LLC

Okay. That's fine. Thank you.

Operator

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

Unknown Speaker

Hi, it's actually Katherine (27:57) for Ying. Just a couple of questions. Have you conducted any subanalysis at different cutoffs, other than the 1.67 times for ALP? And how important do you think this cutoff will be in a commercial setting if OCA is approved? And then, how should we think about the initial uptake in PBC if it is approved, duration of treatment? What do you think is a good proxy to use for the launch? Thank you.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thanks, Katherine (28:27). Good questions. So with respect to your first, the ALP cutoff, you might be aware that over time, there have been a number of single-center studies, retrospective studies, employing different cutoffs, different kinds of endpoints, most of which were based on alk phos on its own or combined as an anchor parameter with bilirubin and other liver enzymes. And the answer is yes. We have run our Phase 3 data on every single one of the endpoints that have been previously published, and all of them that are alk phos based have shown unequivocally the same answer, which is that, no matter how you cut it, what endpoint you – alk phos based endpoint you use, the OCA treated groups, both titration, 5 milligram to 10 milligram and the 10 milligram dose groups in the POISE trial, came out very significant compared to placebo.

With respect to – with the commercial side, I'll pass to Lisa to comment on where we're going to focus.

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Thanks. So yes, thanks for the questions. So look, we know in the U.S. that around 15,000 patients with PBC still have an ALP greater than 1.67 times the upper limit of normal, even after predominantly those have been treated on first-line treatments. So there's a significant need amongst that particular patient group, and I suspect that that's likely to be where physicians start when they start thinking about treating patients for PBC.

In terms of proxies, we really haven't found a good proxy that we've used. We've very much gone back to first principles with this because this is a higher unmet need area. We know there's been really nothing for 20 years for these patients. And that this is largely going to be used after URSO has failed to give adequate control. So I think this 1.67 times over time, I'm sure that there'll be more uptake in that group over time, but certainly to start with we definitely see, and certainly based on the research, that the majority of uptake will be in that group above 1.67 times.

Unknown Speaker

Great. Thanks much.

Operator

Thank you. Our next question comes from Ritu Baral of Cowen.

Ritu Baral - Cowen & Co. LLC

...taking the question. I know you don't want to comment on REGENERATE enrollment yet but could you give us a little detail on the sites? How is site activation going? And are the screen failure rates, at least at this point, in line with your expectations?

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah. Thanks. I mean, so I'll say that we are very hard at work on getting sites up and running in the U.S. and other countries. I alluded in my prepared comments, prepared remarks on two of the investigator meetings we've been having in the U.S. and in Europe. These have been extremely well attended with universal enthusiasm. And again, not surprising, that this is the first ever Phase 3 NASH registration trial and there's really a lot of interest around the world in participating.

I'm not going to provide you with a more specific update but – except to say that I'm pleased with the pace at which we're getting the study infrastructure up and running worldwide. I'm also not prepared to give you screen fail rates, but suffice to say, we are screening for some – NASH, diagnosis of NASH with advanced pre-cirrhotic fibrosis, stage 2 and stage 3. There are a lot of patients like that out there, but obviously you're going to have to screen failures.

I do want to take the opportunity to circle back to a question that Alan asked about the timing of the cirrhosis. The NASH cirrhosis study that we are planning, just to give a little bit more color, that REGENERATE really is the – what I would call our aircraft carrier of a NASH study, and that's where a lot of the company's resources are focused right now, getting this study fully up and running and enrolled as fast as possible. There's a lot of enthusiasm with respect to the NASH cirrhosis study on the regulatory agency side. And as I alluded to, we're getting crystallization of what the study design is going to look like. And we'll plan its initiation at an appropriate time.

Ritu Baral - Cowen & Co. LLC

All right. Just a quick follow-up on that, and then a question on numbers. Do you anticipate significant competition for patients for REGENERATE with other Phase 3s that are going on?

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah. Right now, there is no competition. There's only one other Phase 3 trial that was announced just prior to year-end to our knowledge. That trial has not been initiated yet and so we're right now unimpeded. There are a number of Phase 2 studies that have been enrolled or that are enrolling. But again, there are a lot of NASH patients out there.

Ritu Baral - Cowen & Co. LLC

And as we look at the OpEx guidance that you've given us, and we look at last year's numbers, how should we think about the increase between R&D and SG&A? Obviously you have a launch going, but you are starting additional, significant additional R&D. How should we look at the OpEx number? And then are you, between the 45 reps in the U.S. and the 11 regional managers in Europe and Canada, are those the final numbers? Or is there still hiring going on between 2015 and possibly even – I'm sorry, 2016 and possibly 2017?

Barbara Gayle Duncan - Chief Financial Officer, Secretary & Treasurer

Thank you, Ritu, for the questions. Let me take the last one first and then we can move into the guidance numbers. So in terms of our, as we mentioned earlier, the infrastructure for the U.S. commercial launch (34:58) is mostly complete and so we do have a few extra people but it's not meaningful in terms of what we need to hire for the U.S. launch. Ex-U.S., we have a pretty significant infrastructure as well that we built during 2015, and so we will have other investment that will be necessary. When you think about – and so I don't know if that answers that particular question, but it won't be as significant as what we had to incur during 2015 for that build.

Ritu Baral - Cowen & Co. LLC

Okay.

Barbara Gayle Duncan - Chief Financial Officer, Secretary & Treasurer

When you think about your split out between your R&D and your G&A guidance for next year, if you look at the fourth quarter in terms of, and we did provide that number for you even on the adjusted OpEx basis of the (35:38) reconciliation, but the three months ended December 31, 2015 we had about $77 million of adjusted OpEx. And that was split primarily between the R&D and – it was almost an equal split between the R&D and G&A. And even on the stock comp, we didn't provide that breakout, but it's about roughly half. So you can see that the breakout was roughly half. So we're not giving out guidance for both the – for the guidance around R&D and G&A, but you would expect that, that run rate would look fairly similar.

Ritu Baral - Cowen & Co. LLC

Great. Very helpful. Thanks for taking the questions.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thank you.

Operator

Thank you. Our next question comes from Jim Birchenough of Wells Fargo. Your line is now open.

Unknown Speaker

Good morning. It's Nick (36:21) in for Jim. Thanks for taking our questions. So, perhaps first just going back to the surrogate for PBC, obviously, the ALP thesis has been around and developed for a long time, and perhaps since then there have been big changes in big data, especially genetics. So are there newer concepts that are being developed as a surrogate in PBC that perhaps reflect earlier stages of the disease process? And I have a follow-up.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah. Thanks, Nick (36:51). It's an interesting question, and obviously, PBC as an autoimmune disease has a genetic component. In fact, first degree relative preponderance is I think amongst the highest of the autoimmune diseases. And there have been genetic studies and mapping that have revealed some snips that are common to PBC patients. However, these are purely research studies. I'm not aware of any more advanced work that is proposing a genetic marker as a surrogate in the disease.

I do want to point out that, particularly UK PBC and also the global PBC study group have looked pretty extensively on identifying patients who are at increased risk and would therefore be strong candidates for therapy with OCA. And one thing we know, this was published last year, UK PBC is that patients who are diagnosed at a younger age, less than 50 years of age, tend to be more rapid progressors and less likely to respond adequately to URSO. And basically, what the data show is that the earlier that you start treating these patients, the better. So I don't know – we can have a more extensive discussion offline about the genetics of the disease. But we think that alkaline phosphatase really is the right surrogate.

Unknown Speaker

Okay.

Mark E. Pruzanski - President, Chief Executive Officer & Director

And it's also the one in clinical practice (38:39), frankly.

Unknown Speaker

And then as a follow-up, and it's sort of an add-on to an earlier question but you're after two populations here. You have the intolerant population, and then obviously, the population that's a poor responder or a non-responder. So, in terms of the intolerant population, is there a proxy there that you have looked at in terms of how you think insurers are going to help define what is intolerant, intolerance of URSO?

And then secondarily, once you get passed the bolus of patients who are sitting out there above 1.67, do you see 1.67 as a light switch that as patients get there they'll switch over onto OCA? Or do you see it as there needs to be a rate of change and they need to go passed 1.67 at a certain period of time in order for them to be perceived as having a high risk of really bad outcome? Thank you.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah. Thanks, Nick (39:48). I'll ask Lisa to take that on.

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Okay. Yeah. Thanks for this question. So I think the first piece on intolerance, I mean the proportion of patients who are intolerant to URSO mean the rates there read somewhere between kind of 3% to 5%, 3% to 7%. An intolerant can quite often – meaning they're not tolerating it from a side effect perspective. Quite often, they don't get the optimal dose of URSO on the basis that they're finding it more difficult to tolerate. So I think that certainly the discussions with payors so far has been that they understand that that's a group they may well need access. So it has been treated and they're still not really getting the optimal dose.

So I think that we'll see some really strong interest from prescribers and wanting to give access to that group. But it is a relatively small group. Obviously, the much bigger group are those that have still not achieved an adequate control even after they've been on URSO, for say, 12 months or so. The key really is that a lot of the physicians don't really think about things as 1.67 times upper limit as normal. They tend to have a more absolute number in their head whether it's 150 or something similar to that.

And I think one of the great challenges for physicians is, at the moment, there is no kind of standard set of guidelines around PBC. There's no common perceived wisdom about what, exactly what level you might treat to. And so over time, I suspect that, whilst initially the uptake will be higher in those who've got more advanced disease naturally. There is again even with the payors and recognition that beneath this 1.67 cutoff, there are patients who are, as Mark has said, rapid progressors, who've got much higher probability of progressing their disease through to more advanced fibrosis and cirrhosis. And I think it would just be a natural change over time as people move backwards through the disease multiple and the severity of the disease.

Unknown Speaker

Just quickly (41:51)...

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah, Nick (41:51)...

Unknown Speaker

Go ahead. Sorry.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Sorry. The only thing I'd add to that is that, at our Commercial Day back in December, we presented some market research in the U.S. and Europe and what it showed was that the large majority of treaters, who see both hepatologists and gastroenterologists, who see PBC patients, really want to treat to lower is better, where alk phos is concerned. And so I just want to reinforce Lisa's point that, in the clinic, physicians – neither physicians nor patients tend to think of kind of a 1.67 time upper limit normal. They're not sitting there with a calculator figuring that out. They're thinking about an absolute number, or just simply lower is better for patients above – who are persistently above normal.

Unknown Speaker

So how does that – I mean, how do you think insurers will deal with that? Because your data is, presumably the label will say 1.67 the upper limit of normal (42:49) people?

Mark E. Pruzanski - President, Chief Executive Officer & Director

Lisa?

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Well, we're in those discussions right now with payors. I think that they're – because this has been an area that no one's really looked at for 20 years, that's the thing. The level of understanding of this disease area is still relatively low – I think I mentioned before that we've been doing disease state education and speaker meeting training. And what the – even the key opinion leaders are crying out for, is to have much better disease state education around this for people who've been involved but maybe not treated a lot of patients with PBC.

And I think these are discussions that are still ongoing with payors about where they're going to see the best value. But that's something that we're committed to doing, and we've hired a really strong team who're able to translate the clinical data into something that's very meaningful from a payor perspective.

Unknown Speaker

Okay. Thank you.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah. And just one last point on – and this figures to how you think about modeling the launch here. I think it's an important thing to convey, which is that PBC patients, the ones who are not in immediate danger clinically, tend to follow up with their physicians semiannually or annually. And so, as we said back in December, we want to caution that we don't see this as kind of a warehousing effect, where you're going to get a big bolus at launch. We see this as kind of a relatively smooth ramp up as we penetrate the market and patients come back into the clinic for their regularly scheduled visits.

Operator

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

Joel L. Beatty - Citigroup Global Markets, Inc. (Broker)

Hi. Good morning, and thanks for taking the questions. So could you provide some color on your plans for a trial of non-invasive diagnostic technology for NASH? And what you can do as a company to support this adoption? And also, what non-invasive diagnostic techniques do you see as most promising?

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah, I'll actually ask Rachel McMinn to take that question. She and her team have been working very extensively evaluating non-invasive technologies.

Rachel L. McMinn - Chief Business and Strategy Officer

Yeah. So thanks for the question, Joel. So, as Mark mentioned, we're still very much in the planning phases of this trial. But as you know, there's a host of different kinds of technologies, ranging from different kinds of imaging technology through standard algorithms, up to more proprietary biomarker research, that's just underway now. So I think our goal in this trial is to – we've got a number of different goals, but we do want to help connect with the field, with thought leaders, and make sure that we are helping to advance the field, and really to advance our long-term initiative, which is to ultimately replace liver biopsy as close to launch as possible in NASH.

If you recall, just back a few months ago at the AASLD meeting, we showed just some initial data from the FLINT sub-analysis that showed patients with a response just on a standard algorithm of FIB-4 in the first six months were likely to have a fibrosis improvement at 72 weeks. And that's actually pretty powerful data. So what other kinds of metrics and data can we collect in this trial to help support and advance that so that, when physicians are in practice, when we have an approved drug, they will be able to make intelligent decisions, hopefully without having to biopsy both on response, as well as on, ultimately, on monitoring and diagnosing patients.

So I would say stay tuned. We can have a more lengthy discussion on the differing technologies. We provided a little bit more detail at our analyst event at AASLD. I'd be happy to take you through more details offline.

Joel L. Beatty - Citigroup Global Markets, Inc. (Broker)

Okay. Thank you.

Operator

Thank you. Our next question comes from Joe Schwartz of Leerink Partners. Your line is now open.

Joseph P. Schwartz - Leerink Partners LLC

Thanks very much. Regarding your outreach to physicians, are you getting the sense that they have a significant number of their PBC patients in mind as early adopters? I heard you, what you were just saying, Mark, regarding the lack of a warehousing effect. But I'm just wondering, relative to how we on the Street are modeling the launch, if you could give some qualitative commentary around what you're seeing, as far as the resonance of the unmet medical need in the market on a – on the most practical level, which is just, at the patient level, regarding – relative to how you're seeing all of us model things?

Mark E. Pruzanski - President, Chief Executive Officer & Director

Yeah. Thanks. I think Lisa is best positioned to answer that.

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Yeah. Thanks for the question. So, as you know, we have been working with our territory business managers to really understand and profile those physicians who've been very much involved in treating PBC today. And of course, it goes without saying that we can't, at any point, discuss the data on OCA, okay. So what we're trying to do at this stage is really understand how they're thinking about managing their patients with PBC.

I think it's pretty clear that there is a real strong recognition of the unmet need, particularly for patients who have been treated for some time with URSO for whom they still have an elevated ALP. And as Mark quite rightly said, in the U.S., 50% or so of physicians still ideally would like to get a patient's ALP to normal. But I think practically at the beginning, physicians will initially look at patients who've got a slightly higher ALP to start with as they gain experience. But for sure I think the recognition of the unmet need from a qualitative perspective is very strong.

Joseph P. Schwartz - Leerink Partners LLC

Okay. And then after patients are on drug, could you talk about the types of activities you will undertake to keep them on drug if they're experiencing side effects like pruritus? Any special nursing or other expectation setting or other outreach that you'll be employing?

Lisa Bright - Chief Commercial & Corporate Affairs Officer

Yes. So one of the things that we recognize is that it's going to be important firstly to ensure that physicians and nurses are really well educated around the pruritus data, which Mark has kind of already talked about. And from a commercial perspective, we'll make sure that we have really best-in-class patient services hub that will support the patients through that journey. And so it's something that we want to make sure that the patients feel kind of supported, and most importantly, the physicians and the nurses involved have good access to good data through the medical affairs team.

Joseph P. Schwartz - Leerink Partners LLC

Thank you.

Operator

Thank you. Our next question comes from Liisa Bayko of JMP Securities. Your line is now open.

Liisa A. Bayko - JMP Securities LLC

Hi. Just a follow-up on the whole issue of a non-invasive diagnostic. Can you maybe talk about just based on feedback from regulators, other stakeholders, your own opinion, what are the steps needed from here to sort of getting that to be a reality and what do you think the timing is on that at this juncture?

Mark E. Pruzanski - President, Chief Executive Officer & Director

That's a good question, Liisa. I think the good news is that all the stakeholders whether it's FDA industry or the thought leaders, who treat these patients, all want to get rid of biopsy. We recognize that it's currently the gold standard and required in our trials, but we all want to get to a non-invasive diagnostic and staging technology that's reliable, affordable and takes place of biopsy.

I think, as Rachel mentioned, what we're committed to both in our Phase 3 and the REGENERATE trial to some extent, and then more specifically, the non-invasive technology study we're planning is to identify the best looking of these on different modalities, correlate them ultimately with histology, with biopsy and provide sufficient validation onto the satisfaction of both FDA and the thought leaders to ultimately replace biopsy. And our goal will be to do so as close to or approximate to launch of OCA for NASH, so that we can dramatically expand the market.

Lisa Bright - Chief Commercial & Corporate Affairs Officer

And just to follow-on on what Mark said, Liisa, just so we're clear. We're not, at least at this juncture, we're not looking to develop a companion diagnostic, which is something that you might have seen with oncology. So we're not looking for something that specific. So there's a lot of different technologies out there as Mark alluded to. It's not just the non-invasive technology study, which is going to be much smaller but we will also have a huge amount of data coming out of REGENERATE, whereas, as you know, as we talked about before, we've got a number of non-invasive technologies built into that study. But just to be clear, there is – we're not looking for a specified sort of regulatory approved companion diagnostic. That's not the strategy at this point.

Liisa A. Bayko - JMP Securities LLC

Okay. Got it. And then I just want to ask a pipeline question. I noticed that for the 767 program, you're planning a Phase 2. So maybe you could just give us timing on when we might see Phase 1 with data from that end and give us your vision for a Phase 2, would this be a biopsy study or something shorter. That'd be helpful. That's my final question. Thank you.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Liisa, yeah, I mean so 767 is a very exciting asset. I've said this before that in preclinical models, animal models, chronic liver, intestinal and renal disease head-to-head against OCA, this is a better looking molecule. And of course the hope is that this translates in the clinic. Right now we're focused on completing Phase 1. We expect to complete it – to complete the Phase 1 statin MAA study (53:36) this year. And then we're going to plan Phase 2 from there. But it's too soon to give you an indication of which indication we're going to be focused on in Phase 2.

Barbara Gayle Duncan - Chief Financial Officer, Secretary & Treasurer

Operator, we'll take one more question.

Operator

Thank you. And that question will come from Brian Skorney of Robert Baird. Your line is now open.

Brian P. Skorney - Robert W. Baird & Co., Inc. (Broker)

Hey. Good morning, guys. Thanks for taking my question. I guess just when we think about the endpoints on CONTROL in terms of the sub-fractionation of LDL/HDL, what – I guess what do we hope to learn? And what would you expect given the preclinical data for OCA and how does that feed into just kind of the overall thinking about a lipid profile here?

Rachel L. McMinn - Chief Business and Strategy Officer

Hey, Brian. I'll take the question. It's Rachel. So, look, as Mark mentioned, there's kind of two different parallel endpoints that we're looking at. The most important of which, from a clinician perspective, is really the statin piece. What dose can you effectively offset or more than offset the LDL increase induced by OCA with standard statin therapies? So that is really the most important, I think, piece of data that will come out from physicians.

In terms of the sub-fractions, as you know, there has been some focus and mention on small dense LDL particles. And so it will be of interest to see what happens when patients are treated with OCA, whether it's the large LDL or the small LDL that's really driving the overall LDL increase. But I have to say that there is no consolidation and consensus within the lipidology community. If you were to go out and poll a number of thought leaders there and say, if large LDL goes up, is that a good thing? Or if small LDL goes up, is that a good thing? There's really – what we know today is that LDL is the surrogate for cardiovascular risk. And we also know statin can offset that.

So, while it will be of interest and there will be lots of discussions and of course we're committed to understanding this in mechanism, it's less clear on overall how to interpret – how the field will interpret those data and what the field will do with that data.

Brian P. Skorney - Robert W. Baird & Co., Inc. (Broker)

Okay. Thanks, Rachel.

Mark E. Pruzanski - President, Chief Executive Officer & Director

Thanks, Brian.

Operator

Thank you.

Mark E. Pruzanski - President, Chief Executive Officer & Director

And with that, yeah, I'd just like to thank everybody who listened in and participated in this call this morning.

Operator

Ladies and gentlemen, thank you for your participation on today's conference. This concludes your program. You may now disconnect. Everyone, have a great day.

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