Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT), a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat non-viral, progressive liver diseases, today reported financial results for the three and nine months ended September 30, 2016 and provided other general business updates.
“The third quarter marked another key milestone for our company, representing our first full quarter as a commercial organization,” said Mark Pruzanski, M.D., President and CEO of Intercept. “Initial prescribing interest for Ocaliva has been strong and we believe there is substantial long-term potential for Ocaliva in PBC.”
“In addition to our commercial launch in the U.S., the third quarter was marked by several key accomplishments that have strengthened Intercept’s position strategically and financially,” added Dr. Pruzanski. “These include the publication of our Phase 3 POISE trial in the New England Journal of Medicine, the positive CHMP opinion recommending European regulatory approval of Ocaliva in PBC, and the completion of enrollment in two placebo-controlled Phase 2 trials of OCA in NASH and PSC. We also completed a $460 million convertible notes offering, leaving us with a strong balance sheet. These achievements put Intercept on an excellent footing as we look toward 2017.”
Ocaliva Commercial Update
Net U.S. Ocaliva sales for the quarter were $4.7 million.
Ocaliva was approved by the U.S. Food and Drug Administration (FDA) on May 27, 2016 for the treatment of PBC in combination with ursodeoxycholic acid (UDCA) in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA. Intercept launched Ocaliva in the United States in June 2016 and in conjunction launched Interconnect®, a comprehensive, personalized program that connects patients with dedicated Care Coordinators who help them understand their disease and provides treatment support and, for eligible patients, financial assistance options.
Anticipated Upcoming Milestones
|·||Primary Biliary Cholangitis [PBC] Program|
|o||EU marketing approval decision for Ocaliva anticipated by YE 2016|
|o||EU launch of Ocaliva anticipated in early 2017|
|·||Nonalcoholic Steatohepatitis [NASH] Program|
|o||Top-line results from the Phase 2 CONTROL trial anticipated in 2017|
|o||Enrollment of interim analysis cohort for Phase 3 REGENERATE trial targeted for 1H 2017|
|·||Primary Sclerosing Cholangitis [PSC] Program|
|o||Top-line results from the Phase 2 AESOP trial anticipated in 2017|
|o||Phase 1 trial completion expected by YE 2016|
Three Months Ended September 30, 2016
For the three months ended September 30, 2016, Intercept reported a net loss of $88.8 million. GAAP operating expense for the three months ended September 30, 2016 was $88.2 million. Non-GAAP adjusted operating expense1 for the three months ended September 30, 2016 was $75.0 million, which excludes non-cash stock-based compensation expense of $12.5 million and depreciation expense of $0.6 million.
Intercept recognized $4.7 million of net sales of Ocaliva for the third quarter of 2016. Intercept currently recognizes revenue using the sell-through method (i.e., when its specialty pharmacies dispense Ocaliva to patients, not when products are sold to the specialty pharmacies). Revenue recognition will transition from the sell-through method to the sell-in method once a sufficient period of commercial experience has occurred to enable Intercept to estimate product returns.
Intercept recognized $0.4 million of license revenue related to the amortization of the up-front payments under the collaboration agreement with Sumitomo Dainippon for the three months ended September 30, 2016 and 2015, respectively.
Costs of goods sold (COGS) was negligible for the third quarter of 2016. Prior to the FDA approval of Ocaliva, Intercept had expensed costs related to the manufacturing and build up of commercial launch supplies of OCA. Therefore, COGS was only reflective of packaging and labeling costs incurred in the quarter. Intercept expects COGS to remain negligible until previously expensed supplies of OCA are sold.
Research and development expenses increased to $43.8 million for the three months ended September 30, 2016, up from $27.5 million for the three months ended September 30, 2015. The increase over the prior period was primarily driven by increases in clinical development programs for OCA and infrastructure to support such programs.
Selling, general and administrative expenses increased to $44.4 million for the three months ended September 30, 2016, up from $24.7 million for the three months ended September 30, 2015. The increase over the prior period was driven by the U.S. commercial launch of Ocaliva in PBC, along with increased international infrastructure and pre-commercial activities to support the anticipated launch of Ocaliva in PBC outside the U.S.
Interest expense for the three months ended September 30, 2016 was $7.1 million due to the issuance of the 3.25% convertible senior notes due 2023 (convertible notes) in July 2016.
Nine Months Ended September 30, 2016
Intercept reported a net loss of $292.8 million for the nine months ended September 30, 2016, compared to a net loss of $138.2 million for the nine months ended September 30, 2015. The net loss included $27.0 million and $22.0 million of non-cash stock-based compensation expenses for the nine months ended September 30, 2016 and 2015, respectively, as well as a one-time net expense of $45.0 million for the settlement of the purported securities class action lawsuit in the nine months ended September 30, 2016.
As of September 30, 2016, Intercept had cash, cash equivalents and investment securities available for sale of approximately $780.0 million, compared to $628.1 million as of December 31, 2015. In July 2016, Intercept completed an underwritten public offering of convertible notes. After deducting the underwriting discount and offering expenses, net proceeds from the convertible notes offering were approximately $447.7 million. Approximately $38.4 million of the net proceeds from the offering were used to fund the payment of the cost of capped call transactions entered into in connection with the issuance of the convertible notes.
Intercept projects non-GAAP adjusted operating expenses of $320 million to $340 million for the fiscal year ending December 31, 2016. This decrease from the previous projection of adjusted operating expenses in the lower end of the range of $360 million to $400 million is primarily due to lower than expected clinical development costs and delayed timing in raw material purchases for R&D manufacturing of OCA. This guidance excludes the one-time net expense of $45.0 million for the settlement of the purported securities class action lawsuit, as well as non-cash items such as stock-based compensation. These expenses are planned to support the continued clinical development programs for OCA in PBC, NASH and PSC, increased OCA manufacturing activities, the continued development of INT-767 and other preclinical programs, as well as commercial activities in the United States and pre-commercial activities internationally.
Other than the net settlement amount for the class action lawsuit, which is a one-time expense, Intercept anticipates that stock-based compensation expense will represent the most significant non-cash item that is excluded in adjusted operating expenses as compared to operating expenses under GAAP. Adjusted operating expense is a financial measure not calculated in accordance with GAAP. A reconciliation of projected operating expense calculated in accordance with GAAP to non-GAAP adjusted operating expense is not available on a forward-looking basis without unreasonable effort due to an inability to make accurate projections and estimates related to certain information needed to calculate, for example, future stock-based compensation expense.
Conference Call on November 3rd at 8:30 a.m. ET
Intercept will hold its third quarter financial results conference call and webcast on Thursday, November 3rd at 8:30 a.m. ET. The live event will be available on the investor page of the Intercept website at http://ir.interceptpharma.com or by calling (855) 232-3919 (toll-free domestic) or (315) 625-6894 (international) five minutes prior to the start time (no passcode is required). A replay of the call will be available on the Intercept website approximately two hours after the completion of the call and will be archived for two weeks.
Intercept is a biopharmaceutical company focused on the development and commercialization of novel therapeutics to treat non-viral, progressive liver diseases, including primary biliary cholangitis (PBC), nonalcoholic steatohepatitis (NASH), primary sclerosing cholangitis (PSC) and biliary atresia. Founded in 2002 in New York, Intercept now has operations in the United States, Europe and Canada.