Earnings Transcript for ICPT - Q3 Fiscal Year 2021

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2021 Intercept Pharmaceuticals Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. . I will now turn the call over to your host, Lisa DeFrancesco, SVP, Investor Relations and Corporate Affairs. You may begin.

Lisa DeFrancesco: Thank you. Good morning and thank you for joining us on today's call. This morning, we issued a press release announcing our third quarter 2021 results and financial position, which is available on our Web site at www.interceptpharma.com. Before we begin our discussion, I'd like to note that during our call, we will be making forward-looking statements, including statements regarding our approved product and clinical development program, certain regulatory matters, and our strategy, prospects, financial guidance and future commercial and financial performance. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call. And we undertake no obligation to update such statements except as required by law. These forward-looking statements are based on estimates and assumptions that, although believed to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. Some, but not necessarily all, of the Risk Factors that could cause our actual results to differ materially from our historical results or those anticipated or predicted by our forward-looking statements are discussed in this morning's press release and in our periodic public filings with the SEC. Today's call will begin with prerecorded prepared remarks from our President and CEO, Jerry Durso; our Chief Commercial Officer, Linda Richardson; President of Research and Development and Chief Medical Officer, Dr. Michelle Berrey; and Chief Financial Officer, Andrew Saik. Additionally, available today for Q&A purposes are Dr. Gail Cawkwell, Senior Vice President, Medical Affairs, Safety & Pharmacovigilance; and Dr. Paul Nitschmann, Senior Vice President Regulatory Affairs. Please limit yourself to one initial question in order to allow time for all questions to be addressed. Let me now turn the call over to our CEO, Jerry Durso. Jerry?

Jerry Durso: Thanks, Lisa, and good morning, everyone. Thank you for joining us on our third quarter 2021 earnings conference call. As we near the close of 2021, and my first year as CEO of Intercept, I would like to start by reflecting on the great progress that we've made against the main objectives that we set out to achieve at the start of this year. First, to continue growing our foundational PBC business with Ocaliva; second, to execute on our clinical and regulatory goals, including progressing our clinical development program in advanced fibrosis due to NASH; third, to expand our portfolio and advance our internal pipeline; and finally, to improve our operational and our financial foundation to support our path forward. Regarding our first objective, driving growth in our PBC business, we continue to see the strength and resiliency of Ocaliva. As a reminder, the third quarter was the first full quarter since updates to the U.S. label were finalized at the end of May. We reported third quarter sales growth of 17% over third quarter last year, and as a result have increased our sales guidance for the year. In a few minutes, Linda and Andrew will share additional details about our commercial performance and our outlook for the remainder of the year. Now that we've worked through our label update in the U.S., I have strong conviction in our ability to continue to expand and grow this business long term. We've also made great progress executing on our clinical and regulatory goals, and our NASH program remain on target to generate the largest data package in the field to support a potential resubmission of our NDA for OCA for the treatment of advanced fibrosis due to NASH. These important data will determine our path forward in NASH. We anticipate the data generation process could continue into the early part of next year. And if we believe the data support accelerated approval, our goal would be to have a pre-submission meeting with FDA during the first half of 2022. We also anticipate top line data from our Phase 3 REVERSE trial, which is assessing OCA in patients with compensated cirrhosis due to NASH near the end of this year. We've also been working to expand our portfolio by advancing our pipeline and looking for opportunities to leverage our strengths. As we announced last quarter, we've initiated the first-in-human study for our next generation FXR agonist INT-787 and continue to advance our Phase 2 work for the OCA bezafibrate combination program in PBC. Michelle will share more details on our progress across these programs. Importantly, in addition to making great progress on this year's objectives, we've also significantly strengthened our operational and financial foundation. We've remained prudent with our expenses and reduced our cost structure, resulting in the narrowed operating expense guidance that we announced this morning. We also successfully exchanged the majority of our near-term debt to address the maturity of 2023 convertible notes. Furthermore, we've significantly reduced our burn rate, and we're in a strong cash position with another cash positive quarter. These are critical steps as we enter the next phase of Intercept's journey, where as we previously said, we will be making data-driven decisions and defining the strategic path for the company's future. This path could be supportive of either the pursuit of accelerated approval in NASH or if the data do not support it, a focus on a profitable and growing rare disease business. Our solid foundation will allow us to focus on becoming a strong successful company over the long term. With that, I'm going to turn it over to Linda who will talk about our commercial performance this quarter. Michelle will then provide an update on our regulatory and R&D activities. And Andrew will conclude with a review of our financial performance. Linda?

Linda Richardson: Thanks, Jerry, and thank you to everyone who's making time to join us today. As you saw in our press release this morning, our foundational PBC business once again demonstrated solid performance in both the U.S. and international markets in the third quarter and year-to-date periods. During our last earnings call, we indicated that we expected to see the impact of our label change in the U.S. business in the third quarter. And I'll be providing some commentary on this now. First, the U.S. commercial and medical affairs teams did a great job as they worked to educate healthcare professionals on the new label. We effectively reached our prescribing targets within the first three months following our receipt of the revised label. And now, our sales team has fully pivoted back to promoting Ocaliva for eligible patients. Second, our data show that many of the patients who are discontinuing Ocaliva are on a treatment regimen of once or twice weekly dosing, which has a lower volume impact. These are the patients who should discontinue, given our revised labeling. Third, we have not seeing a significant impact beyond the label population, which you can sometimes encounter when implementing the label update. We've undertaken market research to assess healthcare provider reactions to our revised label, and the feedback has been consistent. Physicians report that they are aware of the new label and understand who the appropriate patients are for treatment with Ocaliva. Furthermore, through discussions with our sales team, community gastroenterologists in particular, noted that they were not typically treating patients who had decompensated cirrhosis before the label change. Therefore, there is less impact on their patient selection post label change. At the time the label was updated earlier this year, we had estimated that 10% to 15% of our Ocaliva population could be impacted. We anticipate that this ultimately will be at the lower end of that projected range. Furthermore, based on current trends, we believe that the impact of the label update on existing Ocaliva patients will be largely realized by the end of this year. Moving forward, we are now focused on new patient starts, which we have seen weakened since the beginning of COVID and through the label change. We continue to see a significant opportunity in our core PBC business, given the vast majority of patients requiring second-line therapy remain eligible for treatment with Ocaliva. The ability to share compelling new data with our PBC prescriber community is fundamental to our beyond ALP messaging. In September, we begin sharing educational materials that highlight new data from our cohort of Ocaliva patients who remained in the open label extension phase of the POISE trial. These data show a stabilization of fibrosis over five years. In a progressive disease like PBC, stabilization is resonating with our healthcare providers and feedback has been very positive. Just a quick word on our compelling international business performance as we had another solid quarter was sales up 25% over last year. We continue to experience increasing growth in new patient starts and adoption of Ocaliva as compared to last year. Multi-channel execution has been a strong focus for us, and we see excellent engagement with our customers across regions. We do anticipate a label change in our international markets in late 2021 with implementation to follow in 2022. The overall strong performance of the commercial teams through the third quarter has led us to increase our sales guidance for the year, which Andrew will discuss in his section of this call. At this time, I'll turn the call over to Dr. Michelle Berrey. Michelle?

Michelle Berrey: Thank you, Linda, and good morning, everyone. I'd like to provide a few key updates today. First, I'll provide you with an update on our NASH data generation and regulatory interactions which remain on track. Second, I'll share some important progress regarding our post marketing requirements in PBC. And lastly, I'll preview some exciting data we will be sharing at the upcoming Liver Meeting and update you on where we are with some of our other pipeline activities. I'll begin with NASH. I'm pleased to say we're currently on track with the important data generation we outlined last quarter. Our safety database for OCA at NASH will now include more than double the patient exposure of our initial interim analysis with more than 6,000 patient years. On the efficacy front, we're currently reading all baseline and month 18 liver biopsies using our new consensus panel reading methodology that we outlined last quarter. We are in the midst of generating the largest data package ever created in the NASH field to support a potential resubmission of our NDA in NASH fibrosis, and we expect this process to continue into the early part of 2022. As a reminder, we are generating these data from the REGENERATE study in pursuit of an accelerated approval for OCA in the U.S. as the first compound to treat advanced fibrosis due to NASH. We have also begun reading liver biopsies for our second large Phase 3 NASH study REVERSE, studying OCA in patients with compensated cirrhosis. We expect that process to be complete and top line data from REVERSE to be available around the end of this year. As long as the data support it, we expect we will be able to hold a pre-submission meeting with FDA in the first half of 2022. While our top priority remains generating important data to support a potential resubmission in the U.S., our MAA in Europe for NASH fibrosis also remains on file. We had requested and were subsequently granted a clock stop for our EMA application. We record this to take advantage of the data generation we were conducting for our NDA. We are now planning to respond to our Day 180 questions this month. While we've made progress and attempted to align these processes, our Day 180 responses will not include all the data we're generating in the U.S., given that this data generation will continue into 2022. And as a reminder, EMA has outlined a high bar for efficacy for the initial and overall NASH development guidance in their draft reflection paper from 2018. EMA expressed a preference for seeing statistically significant and clinically relevant efficacy in both reversal of fibrosis and NASH resolution or a two stage fibrosis improvement. But they also clearly stated that they will be looking at the totality of the clinical dossier submitted and that their final position would be data driven following review of regulatory filings. The unmet need for anti-fibrotic therapy in NASH has never been clearer. The NIH's NASH Clinical Research Network, or CRN, recently published results from a prospective study in the New England Journal of Medicine that again reinforces the strong association between advanced fibrosis and an increased risk of liver-related complications and death in patients with NASH. And now, I'd like to provide an update on our PBC post marketing commitments. Discussions regarding our two post marketing clinical outcome studies remain ongoing with both the FDA and EMA, and we've made some important progress. As a reminder, since the time of the Ocaliva approval for PBC in 2016, we have acknowledged the potential difficulties in recruiting and retaining patients in these blinded, placebo controlled studies, when Ocaliva is commercially available. After gathering feedback from regulators, our next step in that process is to close out the COBALT study. We will collect available placebo controlled data from COBALT and include it as one element of a broader evidence package that will also include real world data and outcomes data from the POISE long-term extension study. This evidence package will inform our dialogue with FDA and EMA, as we work to fulfill our post marketing commitments and obligations. We expect the data generation process to take several quarters and plan to submit this data package in 2022. And on that note, we're proud to share today that one of our abstracts has been selected not only for our late-breaker podium presentation at The Liver Meeting, but as a best of AASLD 2021 abstract. The abstract is entitled patients with primary biliary cholangitis treated with long-term obeticholic acid in a trial setting demonstrate better transplant-free survival than external controls from the global PBC and UK PBC study groups. We are all excited about sharing these data with you on November 15. Ocaliva remains the only second-line agent approved for use in PBC and continues to demonstrate a benefit to patients with this devastating disease. We are committed to working closely with regulators to come to a resolution regarding our post marketing commitments, and I'm encouraged by the progress thus far. Turning to our pipeline, our Phase 2 OCA plus bezafibrate trial is continuing to enroll outside the U.S. As we've shared previously, published data supporting the benefit of bezafibrate and PBC are encouraging and reinforce the potential for this novel combination to reduce elevated alk phos and bilirubin associated with improved survival. We plan to study a broader range of measures of the combination in an additional Phase 2 trial that will be initiated in the U.S. We remain committed to progressing therapies for individuals living with PBC. Additionally, our Phase 1 study of our next generation FXR agonist INT-787 is ongoing. We plan to select a target indication for INT-787 in early 2022. Overall, I'm pleased with the progress our R&D team has made and I look forward to sharing updates on our pipeline programs as we kick off 2022. Before I turn the call over to Andrew, I would like to let you all know that unfortunately I will not be able to join the Q&A session today due to an unavoidable personal matter. I've asked Dr. Gail Cawkwell, Senior Vice President, Medical Affairs, Safety & Pharmacovigilance; and Dr. Paul Nitschmann, Senior Vice President Regulatory Affairs from my team to help answer your questions. I look forward to following up with you next week when I'm back in the office. Now I'll turn the call over to Andrew for a financial update. Andrew?

Andrew Saik: Thanks, Michelle, and good morning, everyone. I would ask to please refer to our press release that was issued earlier today for a summary of our financial results for the third quarter ended September 30, 2021. Beginning with sales performance this quarter, we recognized worldwide Ocaliva net sales of $92.8 million. This compares to 79.5 million in the prior year period and 96.6 million in the second quarter of this year. As a reminder, the third quarter of 2021 is the first quarter following the implementation of our new Ocaliva label, which was finalized in May of this year. Our worldwide Ocaliva sales are comprised of U.S. net sales of $66.6 million and ex-U.S. net sales of $26.2 million. This represents growth of approximately 14% and 25%, respectively, versus the prior year quarter. Our U.S. business performed well, as Linda discussed earlier, and our international business growth over the last year was driven by increased demand and a benefit from country mix relative to prior year. Overall, results reflect a solid global business performance. GAAP operating expenses for the quarter totaled $99 million, which was a decrease of 35.7 million versus the third quarter last year. Non-GAAP adjusted operating expenses were $89.6 million for the third quarter, a decrease of 28.5 million versus the prior year period. As a reminder, our non-GAAP adjusted operating expenses excludes stock-based compensation and depreciation. Cost of sales for the third quarter were $0.7 million compared to $1.8 million in the prior year period. This decrease reflects the timing of purchases of API, packaging, labeling, and other related expenses during the period compared to the prior year. SG&A expenses were $53.3 million for the third quarter, a decrease of 4.4 million from the second quarter of this year and a decrease of $17.3 million versus the third quarter of 2020. Our R&D expenses in the third quarter were $45 million, a decrease of 3.8 million from the same period last year. We expect operating expenses will be higher in the fourth quarter of 2021 relative to Q3 and relative to what we anticipate for next year. This is due to a higher than normal spend in R&D as we prepare the datasets for release later this year and early next year, as discussed by Michelle. For the nine months ended September 30, 2021, total R&D expenses were $133.6 million with NASH-related R&D expenses representing approximately two thirds of this cost. We ended Q3 in a higher cash position than Q2, adding $3 million in cash from operations which excludes the net impact of the debt exchange, new debt issuance and stock repurchase during the quarter. This increase was driven by our strong sales performance in both U.S. and international and our continued focus on managing operating expenses. Even with our large NASH R&D investments, we were cash positive for the second consecutive quarter, which highlights the profitability of our foundational PBC franchise. Our cash, cash equivalents, restricted cash and investment debt securities as of September 30, 2021 totaled approximately $428.8 million. As a result of our strong global performance and with the knowledge that the impact of the label change will be on the low end of our expectations, we are increasing our Ocaliva net sales guidance to $355 million to $370 million from the previously shared $325 million to $340 million. We are also narrowing our operating expense guidance, and now expect operating expenses to be between $380 million and $395 million as compared to our previous guidance of $380 million to $410 million. Lastly, we were able to successfully execute a convertible note exchange to manage the near-term maturity of our debt. Between the debt exchange, a subsequent repurchase of $38 million in notes and private transactions, we lowered our 2023 maturity to $114 million, which allows us to manage our near-term debt with cash on hand. This gives us the ability to focus on growing our PBC business and generating important data in NASH to define our path forward. Since joining Intercept earlier this year, it has been one of my top priorities to ensure that we remain financially strong and well positioned for growth. We have de-risked our balance sheet significantly this year, and we will continue to utilize our cash prudently and ensure that we have a strong balance sheet to support our foundational PBC franchise, execute on our clinical and regulatory milestones, and have the flexibility to expand our portfolio and pipeline. Now I'll turn it back over to the operator to start the Q&A.

Operator: . We also ask that you limit yourself to one question to accommodate everyone and feel free to get back in the queue. And our first question comes from Ritu Baral with Cowen.

Anvita Gupta: Good morning, team. This is Anvita on for Ritu this morning. Congrats on the great quarter. We wanted to get some details on the progress of the reading of biopsies from the REGENERATE trial. Could you comment on how many biopsies have you reevaluated thus far? And how many patients do you have the 48-month follow-up safety data to date? Thank you.

Jerry Durso: Yes. Hi. Thanks for the question. And thanks to the team at Intercept here who's doing a lot of work in the areas that you mentioned. So the work is ongoing as we stated in the prepared remarks. And as we outlined last quarter, the biopsy reads are ongoing. The focus of the ongoing work as we really stay towards the discussion on potential accelerated approval has been reads on baseline and 18-month biopsies. So that's indeed the work. Again, that is ongoing at the same time. The safety data, again, that we outlined last quarter is for the population, and the accumulation of that is more than twice the database that was in the initial analysis back in 2019. So all of that work is ongoing. We are, as you would expect, monitoring that on an ongoing basis, on a weekly basis. And as we sit here today, the work continues and we do expect that that work will continue and ultimately result in this data package that we've outlined being completed into the early part of 2022.

Anvita Gupta: Great. Thank you.

Operator: Our next question comes from Yasmeen Rahimi with Piper Sandler.

Swapnil Malekar: Great. Thanks. This is Swapnil on for Yas. Just one question for us. In your AASLD late-breaking abstract, you show that the event rates are significantly lower for the PBC patients on OCA treatment. I think it's like 54 lower than the global PBC and UK PBC patients. So can you tell us how many of these patients were cirrhotic? And what kind of read through can we only parallel can we draw to the ongoing NASH trial from this database?

Jerry Durso: So thanks for the question. I'll turn that over to Gail. And, of course, we look forward to the important discussions coming at AASLD.

Gail Cawkwell: Yes. So thanks for the question. So in that study, we looked at both an internal database, the POISE long-term safety extension study. That study was largely an earlier PBC population. And so at baseline in that study, there were few but some cirrhotic patients. Over the course of following the study, there were more but still the numbers of cirrhotic patients were relatively low in that study overall. When we matched to the external controls, we were very careful to both use the inclusion and exclusion criteria from the POISE study, so we were comparing like-to-like and to propensity score match to again provide an element of sort of pseudo-randomization as you can in that setting. So we feel like the results are interesting and we look forward to sharing them in more detail in just over a week at AASLD.

Swapnil Malekar: Thank you.

Operator: Thanks. Our next question comes from Michael Lee with Jefferies.

Michael Lee: Hi. Thanks. Good morning. My question is -- can you hear me?

Jerry Durso: Yes.

Michael Lee: Okay, great. Hi, guys. My question is on the F2/F3 analysis you guys are doing and continuing that work early '22. My question is, with all of that reassessment and the inclusion of more patients, can you remind us that you would expect that the data could be the same? The effect could be better or greater? The effect could be less efficacious? Can you just remind us of how that could play out and you just expect to put out a press release on that information? And we'll digest the data at that time. And that's what you would be submitting to the FDA? Could you just maybe put some color around that and contextualize that? Thank you.

Jerry Durso: Yes, Mike, thanks for the question. So I can start on that one. I think importantly, the new analysis, again, as the work is ongoing is going to build on the prior interim analysis, which we think was a robust result with a robust methodology. Nonetheless, we are rereading with the new methodology of interpretation of those biopsies. We do believe this is a robust method, as we've outlined, and it is a method that's consistent with the FDA’s direction for a consensus approach. Of course, we won't have the complete picture till that work is completed into 2022. And, of course, we'll share the appropriate information at the appropriate time once that work is completed. Importantly, we'll look forward to seeing the dataset when it's complete.

Operator: Thank you. Our next question comes from Brian Abrahams with RBC Capital Markets.

Brian Abrahams: Hi, guys. Thank you very much for taking my question.

Jerry Durso: Good morning, Brian.

Brian Abrahams: If you could give us -- hi, good morning. If you could give us any update on the ongoing safety analysis? Our understanding is that some of the cardiovascular, renal and hepatic adjudication of AEs , we're going to start to -- that was going to start to roll in around now. So just wondering your level of confidence on the safety side? And as you look at the totality of efficacy and safety, what's going to be guiding your decision as to whether or not to go back to the FDA? Is there any situation where you would not approach the FDA for a pre-submission meeting? Thanks.

Jerry Durso: So thanks, Brian. I'll start on that one and then perhaps Paul can remind everyone of the ongoing work in the areas on adjudication. As a reminder, the overall question that was posed by the FDA at the time of the complete response letter was around overall risk benefit. And so it's really been against that context that we first had this series of interactions with FDA that we outlined earlier in the year. And I think that put us in a position to make good decisions about which data we were going to generate. And now we're in that data generation process. And obviously, it's going to be the comprehensive picture that we’ll need to complete and then assess based on what we see in the data. Obviously, the step after that, which would be an important step with data in hand, we would interpret the data and the potential discussion of interpretation with the agency would be in a potential pre-submission that we would expect if we're in that path in the first half of 2022. So importantly, understanding and digesting the picture that we believe this dataset will give us will be the important next move for us. Paul, maybe you want to remind on the areas of adjudication, which continued to be part of the ongoing work here.

Paul Nitschmann: Yes. Thank you, Jerry. So you're right. We will have and are having adjudication ongoing in the cardiovascular and the hepatic and the renal arena. And really at this point, there is nothing we can share about that. It's work ongoing. And as Jerry has highlighted a couple of times now, it's all about the benefit risk that we will be able to assess early next year.

Brian Abrahams: Fair enough. Thanks so much.

Jerry Durso: Thanks, Brian.

Operator: Our next question comes from Alethia Young with Cantor Fitzgerald.

Emily Bodnar: Hi. This is Emily on for Alethia. Thanks for taking our question. I'm just curious about your latest thoughts on the REVERSE study and what data you're looking to see there, given the new consensus approach. Thank you.

Jerry Durso: So thanks for the question, Emily. Maybe just a couple of words from me and then maybe Paul can remind of the study. We look at REVERSE obviously as an important dataset. It's an important high risk population. These are patients with cirrhosis that are well compensated. That work is ongoing in parallel, so the reads are happening as we've outlined. We are utilizing a consensus approach, again, consistent with what we talked about in the REGENERATE context. I think that the last point for me is just that this is, again, ongoing work we're monitoring closely. We do look forward to this important dataset. If the data is positive, we think it gives us some real options. And again, importantly, this is a patient where the risk is high and the unmet need is clear and evident, so we look forward to understanding the potential role of OCA in this population. Paul, perhaps you can give a thumbnail on the design as we look forward to the readout to comment, and I believe there's additional information at AASLD on the REVERSE study design.

Paul Nitschmann: Yes, Jerry. Thank you. So as you said already, REVERSE is a study -- it's a Phase 3 study in 919 patients with NASH with well compensated cirrhosis. The primary endpoint is histology at 18 months, and looks for a greater or equal than one stage fibrosis improvement. And as you said, will have a poster at AASLD to describe the study. The study uses three dose groups. One is a straight 10 milligram, one is a titration arm offset and going to 25 and it is placebo controlled.

Jerry Durso: Thank you, Emily.

Emily Bodnar: Thanks.

Operator: Our next question comes from Joseph Stringer with Needham & Company.

Joseph Stringer: Hi. Good morning and thanks for taking our questions. Question on PBC here. Just curious if you can give us a sense for what your current operating margins are specifically for OCA and PBC? And maybe do you have an idea of what those could be sort of going forward? Do you think you could improve those over the next couple of quarters or a couple of years? Thank you.

Jerry Durso: Thanks for the question. We obviously feel good about the performance in PBC in the quarter. We have also described the fact that on a standalone basis, the PBC franchise is a profitable one. Andrew, maybe you can give some additional color on that front?

Andrew Saik: Yes, certainly. And thanks for the question. So we don't break out PBC. The PBC business is a business per se. You can obviously see the sales and the cost of sales on our P&L. These are product. So those are clean numbers. We also stated before that the majority of our R&D expenses are related to NASH. As of Q3 year-to-date, R&D expenses were 133.6 million. Approximately two thirds of those are NASH related. So that should give you sufficient information to break out what the business would look like without the NASH significant Phase 3 trials that we're currently in the process of providing data for at the end of the quarter. Hopefully that helps.

Joseph Stringer: Yes. Thanks for taking our question.

Operator: Our next question comes from Salveen Richter with Goldman Sachs.

Salveen Richter: Good morning. Thanks for taking my question. Could you just help us understand what might be presented at the upcoming Liver Meeting and whether there could be any read through here to the reevaluation data?

Jerry Durso: So Gail -- I'll turn that to Gail.

Gail Cawkwell: Sure. I'm happy to take that question. So I think as Michelle said initially, we're certainly excited that some of our data will be at AASLD. Specifically, the first PBC outcomes data with obeticholic acid; and as Michelle said earlier, accepted as an oral presentation, late breaker and best to the Liver Meeting abstract. We’ll have important new data on the biopsy reading methodology used in NASH. This is not data showing outcomes, but showing how the biopsy reading methodology works and will provide some transparency there. And finally, we will also have some data on REVERSE methodology and baseline data which will be in advance, of course, of REVERSE data release coming later. It's also gratifying that we saw several independent abstracts on obeticholic acid, which is notable once medicine is well established that people start doing independent research. And there were some interesting things there. For example, a Stanford University abstract that notes that liver transplant, waitlist mortality amongst patients with PBC and decompensated cirrhosis is lower since Ocaliva approval compared to before Ocaliva approval. Now this is, of course, encouraging. While not definitive, but it makes for a nice pairing with our own work on the POISE long-term safety extension and external control data. And I think we'll have to just see what else comes up at the meeting. But I think on the NASH side, there's little of notable excitement and mainly work that emphasizes that NASH is certainly a hard field to be successful out in the clinical trial setting.

Salveen Richter: Thank you.

Operator: Our next question comes from Ellie Merle with UBS.

Ellie Merle: Hi, guys. Thanks for taking the question. Just on the NASH biopsy rereads as well as the additional patients, can you remind us what your plans from a statistical perspective are to analyze this data I guess on NASH resolution in fibrosis? Thanks.

Jerry Durso: Thanks for the question. Paul, perhaps you can give a little reminder of the approach there with the primary endpoint?

Paul Nitschmann: Yes. Thank you, Jerry. We're really viewing this as a new analysis. It is a much more robust dataset, longer patient follow up with more patient numbers. As Michelle said, it's more than twice the patient exposure. And we're actually looking at over 600 subjects who have been on treatment for four years or more by now. So we'll -- and same with the liver biopsy, the efficacy analysis, we're really seeing this as a new fresh look at these data. Hope that helps.

Ellie Merle: Yes. I guess any comment there on the powering or the statistical sort of analysis in particular, if you can?

Paul Nitschmann: We’ll completely replicate the analyses that went into the original interim analysis.

Ellie Merle: Got it. Okay. Thanks.

Jerry Durso: Thanks, Ellie.

Operator: Our next question comes from Geoff Meacham with Bank of America.

Aspen Mori: Hi, guys. This is Aspen on for Geoff. Thanks for the questions. Just a couple on the pipeline actually. Can you talk about the decision to study a broader dose range for the OCA beza combo? Is that to look at higher doses, lower doses, both? Is there any data that you’ve seen so far that's kind of informing that decision, or is that maybe just part of the inherent protocol? And then for INT-787, can you talk about some of the target indications you're considering for that asset that you're looking to communicate next year? Is that going to be dependent on the FDA feedback in NASH, or do you already have like a set list that you're thinking about? Thank you.

Jerry Durso: So Gail, perhaps you can start on the bezafibrate. And then I can comment on 787 afterwards. Thanks for the question.

Gail Cawkwell: Sure, happy to do so. So on the OCA bezafibrate combination and dose ranging, it's always important in Phase 2 to do thorough dose ranging. It's something FDA and other regulators absolutely expects, going from doses that show no efficacy that is that low to doses that are higher than you may intend. When you do a combination product, that adds a level of complexity, of course, because you're managing two doses. So our study is designed to meet regulatory requirements and regulatory needs, and to assure we have what we need to progress our program. And so it includes a full range of dose ranging.

Jerry Durso: So on 787, so the Phase 1 work is ongoing. We're progressing through the dose escalation work. We are looking with interest at several areas of unmet need. And I think doing the right work now to be in a position, as Michelle indicated in the prepared prerecorded remarks, that we would expect to select that target indication in the first part of 2022. Again, focus for us is some interesting areas of unmet need that we feel that this compound may have an interesting role in, but some more work to do. And we'll come back next year as we've outlined.

Operator: Thank you. Our next question comes from Matt Luchini with BMO.

Matthew Luchini: Hi. Thanks for taking the question and for the comprehensive update. I just wanted to ask I guess about how to think about REVERSE in the context of REGENERATE. And I guess what I mean specifically is if for some reason REVERSE were to be successful, but the reanalysis didn't pan out or give you the result that you're hoping for to move to support resubmission, would you consider moving forward with a more narrow label? How should we be thinking about that type of potential scenario? Thank you.

Jerry Durso: Yes. Thanks for the question. As I said earlier, REVERSE for us is an important dataset for OCA, I think also for the field and clearly for the patients that are suffering. Our dialogue with the FDA this year that we've outlined in previous calls have been primarily focused upon REGENERATE and getting ourselves to a point where we were able to outline the kind of data we felt appropriate to generate on REGENERATE and now we're in that process now. I think as we get closer and work towards having the REVERSE data in hand, and once we have that data, we’ll clearly be regrouping with the agency. I think if the data is positive, it provides us good options in several different scenarios. And that's the way that we look at the data. Again, it's an important population. There's high unmet need. This is a patient group that in all of the customer work we've done over the years in NASH is one that tends to be of high concern, obviously, to the patient's themselves, but also to the healthcare practitioners. So we do feel if the REVERSE data is positive, we'd have some good optionality. We'll see how all the pieces fit together with data in hand.

Operator: Thank you. Our next question comes from Thomas Smith with SVB Leerink.

Thomas Smith: Hi, guys. Thanks for taking the questions. Maybe just a follow up here. As we think about the upcoming REVERSE trial readout is a pretty wide range of placebo response rates in the compensated cirrhotic NASH population. Can you provide any color on the trial powering and what you've assumed for placebo response on the one stage improvement in fibrosis with no worsening in NASH primary endpoint?

Jerry Durso: Paul, perhaps you can pick up that one.

Paul Nitschmann: Yes. Thank you. The powering has been the standard alpha 1.5 and I believe this one was 90% of power to read significance. I do not have the detail of what the expected placebo response was.

Jerry Durso: Thomas, we can follow back up with you on that one, okay.

Thomas Smith: Okay. Yes, that would be great. And then maybe just one follow-up question. As we think about the MAA in Europe, I guess any additional color you can provide on the decision to respond to the Day 180 questions rather than wait for the outcome of the U.S. data generation and the REGENERATE reanalysis would be helpful. Thanks guys.

Jerry Durso: Thanks. As Michelle said in the prepared remarks, we -- our current plan we're working towards the response to the Day 180 questions this month. Maybe, Paul, you can give a summary of kind of the process as we move forward there. And again, for us, we'll work through the process as it unfolds here.

Paul Nitschmann: Yes. Thank you, Jerry. So purely hypothetically, obviously, CHMP at this juncture could choose to give an opinion based on our Day 180 responses, plus or minus an oral explanation. They could -- although that is not very frequent, they could push us into another Day 180 round of questions, which would allow us the ability to even further align our datasets between U.S. and Europe. And obviously, as always, applicants have the ability to withdraw at any point in time. Does that help?

Thomas Smith: Yes, that’s helpful. Thanks, guys.

Jerry Durso: Thanks, Thomas.

Operator: Our next question comes from Mayank Mamtani with B. Riley Securities.

Mayank Mamtani: Good morning. Congrats team on tracking nicely on both top and bottom line, and especially fairing ahead of expectations relative to the reset last year. Just a quick question for Linda on the PBC dynamics. How should we think about the 2022 outlook here as we are nearing the end of impact in U.S., but maybe not so much in the UN? And maybe help us think about the new patients start dynamic versus sort of -- now that you're in the role and you understand penetration, market penetration and also impact from other clinical trials that are ongoing. And Andrew, if you can bring the picture together on this cash flow positive, like can we see that kind of sustained over the next few quarters?

Linda Richardson: Okay. Well, thank you for the question. Obviously, we're very pleased with how the messaging and the education went on the label change and communication there. And I think that being able to do that in person with representatives that were familiar with our physician prescribing base and going out was very helpful in communicating. And the label also gave clarity on who was in and who was out. And as we stated, we believe that we're near the end of the transition by year end on the existing patient. So we feel that that's pretty much through, and there shouldn't be, as we look at the label impact in Europe in 2022, we don't have that label on hand, of course, but we would perceive that decompensated patients would also likely be not indicated further in that population. Now when we look at the impact, we had estimated 10% to 15% of our population available, the older population. And what we're finding is it was really down on the lower end. And some of the discontinuations, which we expected to see given we had a change in population, were taking fewer doses. And that fewer doses are usually associated with decompensated patients. But what we realized in talking to our customers was that many of our customers were taking a cautious approach to patient who were compensated cirrhotic and they too were -- some of them were on a once or twice weekly dosing. So we do feel confident that the right patients are coming off. Now as I said in my previous comments, the focus now is very much on getting back to business and new patient starts. And we've seen some depression with that over the COVID periods. And I think, frankly, as people waited -- they were aware of an upcoming label change. As they waited to see what the clarity on the patient population would be. And that's very clear, no change in dosing, just one regimen and you can go from there. But the new data that we're sharing, new data drives I think conviction in a product and how can I use this product to help my patients when frankly we only have one second-line product, and that's Ocaliva. So you look at the fibrosis data. And that came again from our POISE extended -- open label extension. And you see in those patients a stabilization of fibrosis. When you have a progressive liver disease, this is an important element. When we talk to physicians, underlying it's not just about ALP. It is the underlying health of the liver and preserving that for as long as possible that resonates at the higher ladder of goal. So you take that data and now with this podium presentation data coming out, comparing a cohort of POISE patients, these aren’t COBALT like patients. These were POISE like patients who were earlier on in the progression of their disease, and start to get that information out at AASLD as a best of abstract, I think that you can see there's a fair amount of new communications that can go out to support the Ocaliva business. And we are very much looking at growth in the market and a return to growth beginning in 2022. Andrew?

Andrew Saik: Yes. Thanks, Linda. So I'll try to answer your question as best I can. So first off, I'll just say, look, we're really happy with the sales performance both in the U.S. and international, and with our ability to manage expenses. Two consecutive quarters of cash growth/neutrality is a terrific win for the company. And I think, again, just highlights the profitability of our underlying PBC franchise. We're not prepared to give guidance for next year, but I will make some comments. So in my prepared remarks, I mentioned that in the fourth quarter, we're going to be increasing expenses to help prepare the datasets that Michelle and various others have discussed on this call. But I also indicated that that will be higher than what we've had this year and higher than what we expect next year. So what you can expect is us to continue to manage our expenses into next year prudently. Regardless of which direction we go with the NASH application to the FDA, we are not expecting an increase in expenses next year relative to this year. We also expect that our PVC business will continue to grow. So with those, we're very happy with where we are and we’ll likely give -- well, we will give guidance next year at the end of our conference call at the year end. I hope that helps.

Mayank Mamtani: Very helpful. Thank you.

Operator: Thanks. Our next question comes from Jay Olson with Oppenheimer.

Jay Olson: Hi. Congrats on the quarter and thank you for taking the question. You’ve spoken about running a profitable rare disease business in the event that NASH doesn't work out? Can you talk about the timeline and gating factors that would lead you to exercise that option? And then maybe related to that, is there any color on when and under what circumstances you would consider pursuing a PSC indication for OCA, or is that an opportunity you're saving for 787 or the OCA bezafibrate combo? Thank you.

Jerry Durso: Thanks for the question, Jay. As we've said a couple of times, which I think is, at the center of all this is the data is going to dictate our path forward. Our path forward in NASH ultimately be an important driver in the strategic decisions. As you can imagine with any company, it's important as you look at major milestones that contingency planning is ongoing. I think importantly, as we've tried to remind this morning, we've been trying to take the right steps along the way this year to solidify the foundation with what we're doing from a cost management standpoint. Andrew outlined how we looked at the convertible debt and making sure that we're solidifying the PBC business. So all of this work is to ensure the right strong foundation for the future as we importantly get the data in hand to make the right decisions. And I think I'm always encouraged by the fact that we have strength in this company to leverage. We are deep in the liver community. We know the players. I think another quarter of illustration of our commercial capability, the R&D expertise around liver and the success. So, again, I think for me, it's about ensuring that we're focused on the readouts. We're going to use the data to make the right decisions moving forward on behalf of our company and our shareholders. And that's really the way that we look at the next phase in the company. Gail, just on PSC, maybe you can --

Gail Cawkwell: Sure. I'm happy to take that. So with regards to PSC, let me start with your second part, which was about 787. As we said earlier, we're looking at a number of high unmet need areas. And I would certainly agree, PSC is one of many high unmet need areas, but it's still ongoing work and we will tell more about that next year after we've completed our work there. PSC, we were pleased. We ran a positive Phase 2 study with PSC with obeticholic acid, which was based on alkaline phosphatase reduction, and we saw nice alkaline phosphatase reduction. Unfortunately, PSC is an area where biomarkers are not as straightforward as they are in PBC, or some other areas, which adds a degree of complexity in studying this area.

Jay Olson: Great. Thank you very much.

Jerry Durso: Thanks.

Operator: Our next question comes from Brian Skorney with Baird.

Brian Skorney: Hi. Good morning, everyone. Thanks for fitting me in. I didn't hear any questions on REGENERATE rereads. So a question on that. So I understand the focus on the fibrotic endpoint. But my question is more on the reread and whether or not you're looking at the NASH resolution endpoint, in addition to the five versus endpoint and just wondering if given the additional patients that are being evaluated, if even the absolute difference remains the same that we saw in the initial of REGENERATE, if that wouldn't our statistical significance? I think the original P value is 0.13 of 931. And just based on statistical protocol, are you able to evaluate NASH resolution for statistical significance, or is any P value on resolution nominal at this point? Thanks.

Jerry Durso: Yes. So as Paul indicated earlier, the readout will be on the same two primary endpoints that the initial analysis was read on, which is in both the improvement of fibrosis with no worsening of NASH and the NASH resolution. And, Paul, anything further on that, obviously, as we said, it's a larger number of patients in this analysis than the original being read with the new methodology. Paul, anything you want to add into that?

Paul Nitschmann: Thanks, Jerry. Not really. As we said, the study hasn't changed. So the powering is identical to what it was. It is a larger patient population, a larger sample size, and therefore you can draw conclusions from that as you will. But it's too early to speculate. We really need to wait until we see the data.

Operator: Thank you. This concludes the Q&A portion of the conference. I'd like to turn the call back over to our host for any closing remarks.

Jerry Durso: Yes. Thanks everybody for the conversation today. Maybe just to summarize what we shared today, I feel good about the fact we've executed well against the objectives that we set out in the beginning of the year. Our global PBC business with Ocaliva continues to deliver. We remain strong under the new label, and I'm confident in our ability to grow this business in the long term. Second, we're on track with the important data generation in NASH, which I believe will allow us the ability to make the critical decisions regarding our path forward. The pipeline programs continue to advance and importantly, we've made great progress strengthening our financial foundation, which will support a successful Intercept and allow us to focus on creating shareholder value over the long term. Definitely look forward to providing further updates as we continue what's a busy period across the clinical, commercial and regulatory activity. And last, but certainly not least, I want to thank the team at Intercept for their strong execution, their commitment and for all the work they're doing in their dedication to the patients we serve. So thanks a lot and we look forward to more conversation along the way. Have a great day.

Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.