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Intercept Pharmaceuticals Inc (NASDAQ:ICPT)
Q3 2019 Earnings Call
Nov 5, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and thank you for joining the Intercept Pharmaceuticals Third Quarter 2019 Financial Results Conference Call. [Operator Instructions] Following opening remarks, Intercept's 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's website for approximately two weeks.

I'd would now like to introduce Lisa DeFrancesco, Vice President, Investor Relations. Please go ahead.

Lisa DeFrancesco -- Vice President, Investor Relations

Thank you, operator. Good morning and thank you for joining us on today's call. This morning, we issued a press release announcing our third quarter 2019 financial position and results, and also posted accompanying slides which are available on our website at www.interceptpharma.com.

Before we begin our discussion, I'd like to note that during the call we will be making certain forward-looking statements, including statements regarding, one, our approved product and clinical development program. Two, the timing of our regulatory filings and potential approval of our product candidates including OCA for NASH and three, 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 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 filings with the SEC.

Today's call will begin with prepared remarks from our CEO, Dr. Mark Pruzanski followed by those from our Chief Operating Officer, Jerry Durso and our Chief Financial Officer, Sandip Kapadia. We'll then open the call to take your questions. 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, Dr. Mark Pruzanski. Mark?

Mark Pruzanski -- Chief Executive Officer

Thanks, Lisa, and good morning everyone. Thank you for joining us on our third quarter 2019 conference call. Let me begin my summary of the quarter by noting the achievement of a historic milestone with our submission of the first new drug application for NASH to the FDA. This was an extraordinary accomplishment for Intercept and for the many patients suffering from advanced fibrosis due to NASH, who unfortunately have no approved therapies available to them.

I'd like to personally thank our team for their tireless efforts that resulted in our submission in September, consistent with our public guidance. We remain on track with our marketing authorization application or MAA in the EU with an anticipated filing later this quarter. In addition to the execution of our regulatory filings, we've continued to be laser focused on ensuring commercial readiness for the first ever NASH launch. With more than 15 years of experience, focused on the development of novel therapies to treat progressive non-viral liver diseases, Intercept remains the only company to have demonstrated a therapeutic anti-fibrotic benefit in large placebo-controlled Phase 2 and 3 trials, with our first-in-class FXR agonist OCA, that we believe to be crucial for the effect of the treatment of patients with advanced fibrosis due to NASH.

As the leader in this space, we've proven time and again, there is simply are no shortcuts. Developing effective new treatments for these indications is a marathon, not a sprint, and we remain well positioned for continued success with the anticipated first approved NASH therapy on the horizon. We are in the unfortunate position to be building on our established strong standing within the liver community globally. Based on the foundation, we've built an ongoing commercial success of our PBC business worldwide. We have great confidence in our ability to execute a successful first market launch of OCA in NASH, which provided FDA grants as priority review and approval could be as early as the spring of 2020.

I mentioned PBC and I'm pleased to point out the continued strong momentum in our business globally. We've continued to see steady demand growth versus the prior year quarter based on solid execution of our commercial organization worldwide. Given our performance to date, we have now increased our 2019 full year net sales guidance for Ocaliva to between $245 million and $250 million. We believe our established medical and commercial infrastructure supporting the PBC business, uniquely positions us for success in NASH. We've developed strong relationships with hepatologists and gastroenterologists, the specialists treating patients with advanced fibrosis due to NASH, many of whom have already gained valuable experience prescribing Ocaliva to PBC patients.

As we've previously stated, we are flexing up our existing infrastructure and capabilities while building on our relationships within the community and preparation for our NASH launch. Following its anticipated approval, OCA's position to become the foundational therapy in patients with advanced fibrosis due to NASH. We continue to have productive interactions with physicians, payers and patient groups, which Jerry will discuss in more detail shortly. These stakeholders all recognize the critical importance of the therapy with a robust antifibrotic benefit underscoring what we believe to be OCA's key advantage.

I now want to pivot and spend some time discussing the upcoming Annual Meeting of the American Association for the Study of Liver Diseases. The AASLD Liver Meeting, where we will have a significant presence and more than 20 abstracts being presented in the general and late breakers sessions. Our team is dedicated to our customers and the hepatology community and we're excited about the posters and presentations that will be showcased at The Liver Meeting.

Some highlights. On the PBC side we're presenting the final results from our Phase 3 POISE five year open label phase, demonstrating OCA's durable therapeutic benefit with no new long-term safety findings in PBC patients on treatment for up to six years. On the NASH side, we'll have an oral presentation of the REGENERATE interim analysis results in the expanded intent to treat population which reinforces the consistent benefit that OCA provides across the broader patient population. There are also two important patient reported outcome or PRO abstracts from REGENERATE, including one demonstrating the patient reported quality of life scores are substantially below population norms, indicating that NASH with established fibrosis is not an asymptomatic disease, and that effective antifibrotic treatment can improve PRO scores.

We also have an important first presentation of OCA's effect on non-invasive tests, NITs, that are most commonly used by physicians in assessing their NASH patients. As we've said before, we believe there is growing acceptance in the medical community of NITs, specifically for the diagnosis and staging of fibrosis due to NASH. The new data that will be presented this week at The Liver Meeting are coming at an important time ahead of our expected launch.

We will showcase OCA's ability to drive early and consistent improvements in a number of NITs, including we believe for the first time ever in a therapeutics trial, clear improvement in FibroScan assess transient elastography, a measure of liver stiffness correlated with fibrosis. Given the invasive and expensive nature of liver biopsy, it's really encouraging to see the NASH field move to -- embrace these non-invasive tests. And we believe the data from robust well controlled Phase 3 studies, such as the interim analysis of REGENERATE will further accelerate the validation and adoption of non-invasive alternatives to biopsy as the NASH care pathway evolves.

Our ongoing Phase 3 NASH clinical development program continues to progress well with the completion of enrollment of the outcomes cohort of REGENERATE, with close to 2,500 patients randomized. And we continue to drive toward the completion of enrollment of REVERSE. Our Phase 3 trial in NASH patients with compensated cirrhosis is the only such study currently ongoing. We're on track to finish screening this month with expected completion of randomization early in the New Year. As a reminder, the primary endpoint in REVERSE is fibrosis improvement with no worsening of NASH, identical to the endpoint OCA achieved in REGENERATE.

And last quarter we announced we were expanding target enrollment in REVERSE to up to approximately 900 patients, plus extending the double blind phase of the study to 18 months to align with REGENERATE. As recently reaffirmed by FDA, we expect a successful readout of REVERSE to support expanding the indication of OCA to the treatment of NASH patients with compensated cirrhosis. In summary, as we approach year-end, we're pleased to update you on the important progress we've made against our commercial and development objectives in 2019. We expect we will end this year with approximately $1.25 [Phonetic] billion in Ocaliva net sales, just three years after the launch of our orphan indication.

As a reminder, PBC is a rare liver disease in a market where no new therapies had been approved in 20 years prior to the approval of Ocaliva. It was uncharted territory, much like NASH is today. We've developed the PBC market thoughtfully and have been successful delivering a novel therapy to patients in need, with regulatory approvals in more than 30 countries today. With our recent NASH NDA submission and upcoming MAA filing, we are uniquely positioned to do this again in NASH. While the NASH market represents a much larger commercial opportunity, we believe our foundation in the specialist hepatologists and gastroenterologists community really positions us for success. I couldn't be more proud of the continued amazing accomplishments of our Intercept team worldwide, now more than 500 strong.

Before I turn it over to Jerry, I'd like to announce that we plan to host an investor event on Monday, December 16th, to provide additional detail regarding our NASH launch plans, including insights from our market research within the physician and patient communities and our thoughts about the commercial opportunities that we see ahead of us. Starting with our anticipated U.S. approval and launch next year. While there are of course some details we won't be able to provide at this event such as anticipated pricing and certain details with respect to our label, that will take final shape through the regulatory review period. Rest assured, we're working hard in these areas and based on progress made to date across the Board, feel confident in our ability to successfully launch OCA and NASH following approval.

With that, I'll turn it over to Jerry for an update on our global commercial PBC business and our NASH prelaunch activities. Jerry?

Jerome B. Durso -- Chief Operating Officer

Thanks, Mark, and good morning everyone. In quarter three, we reported $61.5 million in worldwide Ocaliva net sales, representing 32% growth over the third quarter of 2018. In the U.S., we achieved net sales of $45.2 million in the third quarter representing an increase of approximately 23% as compared to the prior year quarter and reflecting continued sequential growth in demand.

Turning to the international region, we achieved ex-U.S. net sales of Ocaliva of $16.3 million in the third quarter, representing an increase of approximately 65% as compared to the third quarter of 2018, reflecting strong launch performances in our key markets following rapid national reimbursements. We're particularly pleased that our teams continued to increase the number of new patient initiations across the region as we transform PBC management. As we look ahead to the remainder of 2019, I'm confident in our ability to drive momentum in our commercial PBC business.

Now turning to NASH, we continue to make significant progress on our launch preparations. In the U.S., we continue working with physicians, payers and patients focused on a framework defined by early and advanced fibrosis rather than the traditional staging of the disease. This change is being supported by the growing acceptance of non-invasive tests and we continue to make progress on that front. Based on our market research, most of the patients with fibrosis due to NASH under specialist care were identified without a biopsy. And the majority of community-based specialists report that they're comfortable identifying patients using non-invasive tests including imaging modalities and blood based measurements. We expect the use of these tests to continue to grow as important tools in the management of NASH patients.

We're also very encouraged by the non-invasive data demonstrating OCA's efficacy, which will be presented at the upcoming AASLD medical meeting as Mark mentioned earlier. What we have learned continues to reinforce conviction in our thesis that there are many patients today suffering from advanced fibrosis due to NASH without an approved treatment option. Specialists are eager to treat these patients with the most urgent goal of preventing advancement to cirrhosis. New data also suggests that the progression to cirrhosis can happen faster than previously anticipated.

For example, in the advanced fibrosis population, one in six patients can progress to cirrhosis in just 14 months. These patients are critically ill and the urgency to treat is paramount. Our market insights indicate a clear willingness to treat these patients with an anti-fibrotic therapy with OCA's target product profile once approved and available in the market. Our data also tells us that the urgency to treat is not just with physicians as the majority of patients with advanced fibrosis report that they are very concerned about their disease. Many of these patients are seeking more information and during the quarter, we launched NASH Truth, which is an unbranded disease education campaign focused on informing patients about the risk of NASH and progression to advanced fibrosis.

Our conversation with the payers in the U.S. are progressing well. We continue to educate them on the disease state and the importance of treating advanced fibrosis and the best way to identify and monitor these patients. Importantly, we're now engaging in a phase of proactive discussions with payers under FDA's guidance regarding data from our Phase 3 REGENERATE study, as we continue the sequential dialog through approval and the launch. Payers view the prevention of cirrhosis and the related complications as a key value driver and they generally agree that patients with advanced fibrosis have the greatest unmet need. Payers also recognize the evolution toward the greater use of non-invasive methods to diagnose patients with advanced fibrosis.

We believe that OCA strong value proposition based on a demonstrated fibrosis benefit resonates with payers, and we'll continue to make the communication of this benefit a top priority. I'm also happy to note that the expansion of our U.S. payer team in the field is nearly complete and we have the right capabilities to ensure our success at launch. As we look ahead, we're preparing for a specialty launch focused on patients with advanced fibrosis due to NASH. Our plan is to target approximately 15,000 hepatologist in GI specialists in the U.S. We already cover about 5,000 of these specialist today for PBC, with approximately 55 territory business managers.

We're on track to increase our internal sales organization to approximately 150 Intercept territory business managers by the time we launch and we now have identified the majority of the sales managers to support the scale-up [Phonetic]. Consistent with our approach in PBC, we expect to deploy incremental field personnel from a contract sales organization to give us additional reach and flexibility. The first wave of our new disease state contract sales team completed training and began educating specialists last month. We've also completed the expansion of our U.S. medical affairs team and the team has been executing well on a host of educational programs.

Overall, we will remain focused on maintaining our strong PBC business while ensuring we're prepared for every phase of our upcoming launch. Across our international region we have a footprint in place in the key markets and continue to focus on market access preparedness and thought leader engagement. It's important to highlight that the team we've built for this launch has broader expertise and skill sets. Many of direct experience in leading the launch of numerous successful blockbuster drugs within larger pharmaceutical companies across many therapeutic areas. We believe this deep expertise is important as we approach a blockbuster first to market opportunity with OCA in the advanced fibrotic segment.

To summarize, I feel very confident with the team we've built, the progress we're making and our ability to take advantage of this important opportunity. I look forward to sharing more details about the launch at the event in December.

And now, I will turn the call over to our Chief Financial Officer, Sandip Kapadia for a financial update. Sandip?

Sandip S. Kapadia -- Chief Financial Officer

Thank you, Jerry, and good morning everyone. Please refer to our press release issued earlier this morning for a full summary of our financial results for the quarter ended September 30, 2019. Our solid financial results during the third quarter positions us well for a strong end to 2019. In the third quarter, we recognized $61.9 million in total revenue, up from $47 million in the third quarter of 2018, showing a growth of 32% versus the prior year quarter. Our third quarter Ocaliva net sales comprised of U.S. net sales of $45.2 million and ex-U.S. net sales of $16.3 million. This represents a growth of approximately 23% and 65% versus prior year quarter respectively.

We continue to see solid Ocaliva demand growth in the U.S. During Q3, we observed orders from specialty pharmacies below underlying prescription growth. This was a reversal of the trend we observed in Q2 and within our expectations as outlined during our Q2 call. Total gross to net deductions for the third quarter were toward the lower end of our previously communicated 10% to 15% range.

Our GAAP operating expenses for the third quarter were $137.5 million and our non-GAAP adjusted operating expenses were $122.1 million. As a reminder, our non-GAAP adjusted operating expenses excludes stock-based compensation, depreciation and amortization. Our cost of sales for the third quarter was $0.5 million and were consistent with the prior year quarter. Our selling, general and administrative expenses for the third quarter were $76.8 million, this was an increase of $20 million over the prior year quarter and was driven primarily by increases related to our NASH launch preparation activities.

Our research and development expenses for the third quarter were $60.2 million, this was an increase of $12.3 million over the prior year quarter. The increase was primarily driven by costs associated with our NASH development program and NDA submission efforts. As of September 30, 2019 we had cash -- cash equivalents and investment debt securities available for sale of approximately $712.4 million.

Turning to our financial guidance for the year, 2019 continues to be a critical year as we build momentum in our PBC business, while deploying resources to support our NASH regulatory efforts and launch activities. We are confident in the financial outlook for the remainder of 2019 and expect to see continued strong growth demand in Q4 for Ocaliva.

As Mark mentioned earlier for increasing our 2019 Ocaliva net sales guidance range to between $245 million and $250 million, from the $235 million to $245 million previously. We continue to expect gross to net for the year to be in the 10% to 15% range. We now expect 2019 non-GAAP adjusted operating expenses to be between $480 million to $500 million, from the $470 million to $500 million previously. We also recently announced a mutual agreement to terminate our partnership with Sumitomo Dainippon in China and we are pleased to have the full unencumbered rights to OCA globally.

In summary, we're in a very strong cash position, have good momentum in our PBC business, are making solid progress advancing our regulatory filing, while continuing to make important investments to prepare for a successful launch of OCA and NASH. Finally, as a reminder non-GAAP adjusted operating expense is a non-GAAP financial measure under SEC regulations. Please refer to our press release issued earlier this morning for a full explanation and reconciliation of this measure.

I'd like to now turn it over to the operator for any questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from the line of Alethia Young with Cantor Fitzgerald. Your line is open.

Emma Nealon -- Alethia Young -- Analyst

Hi, this is Emma on for Alethia. Can you help us frame what information we should expect at this December investor update? And just in particular what do you anticipate being in a position to give patient number and diagnosed estimates at that time?

Mark Pruzanski -- Chief Executive Officer

Yeah. So Emma, I'm going to give that to Jerry. Thanks.

Jerome B. Durso -- Chief Operating Officer

Yeah. So we definitely look forward to the meeting in December, and what I think we should expect is that, we'll update you all on our thinking about the market, how we see the overall patient segments, where we anticipate our plan will target, and based on all of the data that we've accumulated to date the relative sizing of these segments and how we're going to attack it. So I think clarity on the overall commercial approach to the different market segments. Again for us, thinking about it more in the context of the market moving toward early and advanced fibrosis and how we see that in the context over time.

Emma Nealon -- Alethia Young -- Analyst

Okay, and then just also wondering if you could provide any color on how your conversations are evolving with payers around F2 patients have comorbidities and specifically whether they're receptive to the fact that NASH with fibrosis could have non-linear progression?

Jerome B. Durso -- Chief Operating Officer

Yeah, again the discussions with the payers are progressing well. As you can imagine, it's a sequential dialog we started with a lot of discussion around the disease state and now we're moving into more depth on the -- on our data. The payers do recognize that the group of advanced patients are the ones that they're concerned about in terms of progression to cirrhosis and all of the complications and costs that are accumulated. With them and now we're in that window where we're really defining with them, the right advanced segment frankly looking at how best to identify those patients in the real world. They are thinking about how best to look at these patients, and clearly, they see the progress also toward more non-invasive means of diagnosis as the payers recognize like all the other stakeholders, some of the challenges that exist with biopsy.

Emma Nealon -- Alethia Young -- Analyst

Great. Looking forward to the update in December.

Operator

Thank you. Our next question comes from the line of Brian Abrahams with RBC Capital Markets. Your line is open.

Brian Abrahams -- RBC Capital Markets -- Analyst

Hi there. Thanks very much for taking my questions. I guess, now with the NDA filed, I'm just wondering if you had any updated thoughts on whether the FDA might hold an AdCom and what key questions might be discussed -- potentially discuss there? And then I guess secondarily, as you're doing, you're on the ground market research, what sort of levels of pent-up demand in NASH are you sensing relative to what you guys feel is the initially addressable market? I guess, I'm just wondering how indicative the early launch numbers and uptake could be for the overall longer term trajectory? Thanks.

Mark Pruzanski -- Chief Executive Officer

Yeah, thanks Brian. I'll take the first question. So we don't have any additional insight since the last time we talked to you about the possibility of an AdCom. We are prudently preparing for one, but of course it will be up to FDA to notify us whether they want to hold one or not. With respect to the second question, I'll ask Jerry to address it.

Jerome B. Durso -- Chief Operating Officer

Yeah. So thanks for the question regarding how we see the initial phase of launch. I mean, I think first of all, we clearly recognize that this is a significant opportunity as we continue to stay focused on this advanced population. But we plan for a strong launch. We're going to focus on the heps and GIs who are the ones who are most likely treating this advanced to segment, that we're targeting a couple of additional items, which I think are important.

We would think about the payer dynamic as being typical in terms of timing of a specialty product launch, so they'll go through their formulary and coverage decisions as per their process, which is a vary -- from payer to payer. We do know that there are patients that are under the care of specialists today that the specialists are comfortable using an anti-fibrotic like OCA for --. We would anticipate that treatment flow would be more like a typical chronic therapy where patients are presenting at their next scheduled visit, as opposed to a large group of patients on day one of launch. So we think about a strong launch and again typical with what you see with the chronic speciality medications.

Brian Abrahams -- RBC Capital Markets -- Analyst

That's really helpful. Thank you.

Operator

And our next question comes from the line of Michael Yee with Jefferies. Your line is open.

Michael Yee -- Jefferies -- Analyst

Hey, guys. Thanks. And look forward on the work you guys have done about the launch. I guess it seems that you've made a lot of positive comments around your view of lack of need of a biopsy presumably. And whether FDA or payers would require that? Can you just remind us your confidence level or any precedents that a biopsy has been required for any type of these liver drugs or other ever drugs? And what precedent there is for payers to do that? And then as it relates to a follow-up question that was just asked, can you just remind us how often these NASH patients actually see their doctors or is that a consideration or they're actually people that will be ready lined up ready to go. Thanks.

Mark Pruzanski -- Chief Executive Officer

Sure I'll start, Mike. So on the regulatory side, I've said this before, it's highly atypical of regulatory authority to specify diagnostic method in a label. And certainly with respect to FDA, we know that they are just as a tuned to the need to move away from this invasive method of diagnosing staging patients as any other stakeholder. I think there is precedent back in the days when viral hepatitis studies were done with biopsy, you don't see the use of biopsy or certainly not the requirement of any kind of biopsy in those labels. On the payer side, Jerry can comment.

Jerome B. Durso -- Chief Operating Officer

Yeah, Mike, I think your question was regarding the frequency upon which some of these patients are in the specialists office. Obviously, there is some variability there. But a good guidance is kind of once to twice a year depending on some of the specific elements with the patients. So these patients that -- again we would anticipate to be targeting first are ones that have been recognized as having progression of disease and would be under the care on a relatively regular basis with their hepatologists or gastroenterologist.

Mark Pruzanski -- Chief Executive Officer

And then Mike just rounded out, we've said before, the majority of these patients are under specialist care today. I have not received a biopsy. We are certainly working very hard with respect to the non-invasive tests that I referenced in my prepared remarks. We're very excited about the data that are being presented next week at AASLD. For example, looking at both proprietary, non-proprietary blood tests and imaging modalities like FibroScan, transient elastography. So this is a work in progress, but I think we've said before that all stakeholders, including payers are well aware of the deficiencies of biopsy that the expense, the risk, the variability, the fact that, it's not standard of care in day-to-day clinical practice. So that's kind of where we're at.

Jerome B. Durso -- Chief Operating Officer

Yeah, Mike. The only other thing that I would add is of course, when we talk about the presentation of these patients, that's all in the context of no therapeutics available. So we do anticipate again that the motivation to deal with these patient goes up when there is a drug available finally.

Michael Yee -- Jefferies -- Analyst

My point was just therefore if you do not have biopsy requirements either by payers, like you say, it could be possible or FDA, we feel very good that there is a huge bolus of non-biopsy patients that are there for you.

Mark Pruzanski -- Chief Executive Officer

We know that there are -- and again, we'll get into some more details on this next month. I think it will be one of the interesting items. We do know that there are this group of patients that are with specialists already. And that have not only been identified as advanced but have sometimes a number of these tests already done in a relatively recent time. And again one of the things that's been lacking is a path forward for the physician and the patient in terms of treatment.

Michael Yee -- Jefferies -- Analyst

Got it. Thank you.

Operator

Thank you. And our next question comes from the line of Ritu Baral with Cowen. Your line is open.

Ritu Baral -- Cowen and Company -- Analyst

Good morning guys. Thanks for taking the question. I wanted to ask about the 15,000 clinicians that you mentioned that you will be targeting. Can you give us a little more granularity on who they are, and why you picked them? Maybe split between hepatologist and gastros, whether they're at NASH centers -- community centers? And at least your current thoughts on what percent of NASH patients may be under their coverage and further advanced NASH patients under their coverage?

Mark Pruzanski -- Chief Executive Officer

Yeah. So I'll address the first part of the question, and I think the second part of the question in terms of the percentages that fall, that's probably an item that you'll see more from us in a couple of weeks. When we talk about the 15,000, -- specialist targets, out launch that is the broad group of GI specialists, essentially the bulk of all of the hepatologists that have relevance in NASH. And again the broad-based community group obviously the GI Group has some several different segments inside of that, but we are capturing the vast majority of GI specialists with that 15,000. It is a flex up as we said, the great thing is -- is that the core part of that 5,000 or so we have been already dealing with over time in PBC and so the incremental physicians that will get -- is to get at the larger group of specialists who treat NASH. We've looked at quite a bit of data as you can imagine there is not traditional prescription data in NASH, since there haven't been any approved therapies. But we're looking at a lot of interesting data sets to be able to identify those physicians that have the advanced population that we expect to be treated first.

Ritu Baral -- Cowen and Company -- Analyst

Is there like it tier within them that covers more advanced NASH patients or specific centers of excellence that you are -- that you'll be targeting first in Tier 1?

Mark Pruzanski -- Chief Executive Officer

Yeah, there will be a subset of those in the key centers obviously. Some of the academic centers, the groups that are heavily involved in the clinical trials in terms of opinion leadership, etc., will be a core part of that. And then there is another real important audience, which is the busiest community-based gastro practices where there are a large volume of patients due to the overall size of those practices.

Ritu Baral -- Cowen and Company -- Analyst

Great. Thanks for taking the questions.

Jerome B. Durso -- Chief Operating Officer

Thanks Ritu.

Operator

Thank you. Our next question is from Yasmeen Rahimi with ROTH Capital Partners. Your line is open.

Yasmeen Rahimi -- ROTH Capital Partners -- Analyst

Hi team. Thank you for taking the questions. So, first, congrats on dominating the liver meeting with 22 presentations. So my first both on my questions are centered on the data being presented at the meeting. The first one is on the late-breaker as the five-year long-term safety data are employed. Can you maybe give us some color on, did you look at changes and provide us over five years or event rate? And then how does this data set inform you in regards to COBALT? And then where are we in regards to COBALT timeline and how important is this outcome data, not only end market penetration for PBC, but as well as the NASH. And then I have one more follow-up in regards to Abstract 1290.

Mark Pruzanski -- Chief Executive Officer

So, thanks Yas, and thanks for focusing in on the data. We're obviously really excited about AASLD this year. We do have 22 NASH and PBC abstracts. I think it's really important to highlight the long-term PBC data, this again, this is the completed Phase 3 POISE trial data. We had a five-year open label extension phase-up to the one-year double-blind, so we have a number of patients who've been exposed in that study for up to six years. And as I mentioned in my prepared remarks, we've got durable, stable therapeutic response with no new safety signals and a nice tolerability profile as you mentioned.

I can't comment on specific measures of pruritus during that long-term follow-up, except to note that patients obviously vote with their feet. And we do see this long-term favorable tolerability, that we expect to extend to majority of patients treated with this drug. With respect to COBALT, which is our ongoing Phase 4 confirmatory outcome study in PBC, that continues to enroll. And we're on track in terms of event rate, it's premature for me to guide as to when we expect that you read out. But I will say that this is important, both on the PBC and NASH sides. We're going to continue generating really important clinical data and ultimately clinical outcomes data and that we believe is going to continue to drive a differentiated profile for OCA, our second line in PBC and as the established foundational therapy in NASH. So anyway we encourage you to come and check out all the abstracts at the meeting.

Yasmeen Rahimi -- ROTH Capital Partners -- Analyst

Thank you, Mark. And then the second question is in regards to Abstract 2090. So and this abstract OCA looked at mortality rates in PBC patient with hepatic decompensation before OCA and after OCA era. So specifically did you look into the 429 patients that were in the era after OCA and what percentage of them we're taking OCA, and therefore you can actually calculate the direct effect on OCA improving mortality rate. And if you have not done so, do you plan during such analysis and then when should we be expecting to see that?

Mark Pruzanski -- Chief Executive Officer

Yeah, you're talking about Ray Kim's abstract. So this is not an Intercept abstract, very interesting -- went and looked at a large number of PBC patients with advanced disease, decompensated cirrhosis Child-Pugh B and C. This is precisely the advanced segment that is the most fragile, at most risk where Ocaliva is recommended on starting dose -- just once a week. And the conclusion of this abstract was that since OCA was approved over three years ago, mortality in this narrow patient segment appears to be lower than what would have been predicted based on the natural history of the disease. Now, I just want to stress the conclusion of this abstract is that, this cannot be causally associated necessarily with Ocaliva. And so the answer to your question is we don't know or I don't know at least which of these patients if any were on treatment. But certainly the conclusion is that, with Ocaliva around mortality appears to have gone down. I do think it's worth -- looking plunging more into the data, we'll look forward to collaborating with Raychem on that.

Yasmeen Rahimi -- ROTH Capital Partners -- Analyst

Thank you, team. See you in Boston.

Mark Pruzanski -- Chief Executive Officer

Thank you.

Jerome B. Durso -- Chief Operating Officer

Thanks Yasmeen.

Operator

Thank you. Our next question is from Jay Olson with Oppenheimer. Your line is open.

Jay Olson -- Oppenheimer -- Analyst

Oh, hey. Thanks for taking the question. I also had some questions about AASLD abstracts. There is an abstract exploring synergies between bezafibrate and OCA and PBC. Can you talk about how you plan to leverage those synergies in PBC? And also maybe talk about potential synergies between these two molecules in the treatment of NASH, and then I had one follow-up.

Mark Pruzanski -- Chief Executive Officer

Yeah, thanks for the question, Jay. So yeah, you're referring to an abstract out of France. This is a second on European cohort of patients. And this is interesting, it's Chris Corpus show who is the lead investigator in the [Indecipherable] study that was published last year. And what do you looked at was patients with inadequate or intolerant to UDCA, who were then put on either Ocaliva and second line or bezafibrate second line. And then, after a period of time were put on the triplet therapy, so the combo therapy of OCA and Beza.

And anyway you look at the data, it's very clear that the combo vary substantially improves response, just as would be predicted and that again supports our rationale after we licensed specified rate earlier this year in the U.S. to proceed with the development of fixed-dose combination of the two compounds. First for the treatment of PBC and then we've also said that we intend to try it in NASH, so again, we think that it's another robust data set that can be leveraged in support of the combination therapy in PBC.

Jay Olson -- Oppenheimer -- Analyst

Great. And then my second question is related to a recent publication describing long-term benefits in patients with PBC after three years of treatment with OCA and focus is on histological endpoints. And that publication combined with the abstracts you have at AASLD looking at the benefits of OCA treatment in patients with PBC after up to six years of therapy. Can you just talk about what sort of competitive barrier these data represent and what the impact would be of these data on new entrants into the PBC market?

Mark Pruzanski -- Chief Executive Officer

Yeah, sure. I mean I commented on this a couple of minutes ago, that we continue to generate exciting data that the publication you're referring to is the, the data we presented last year and a subset of POISE patients who underwent baseline biopsy and then a follow-up after three years and we showed fibrosis benefit in those patients, albeit small, small number and it wasn't controlled. And that coupled with the long-term safety and efficacy data being presented at this meeting and eventually we hope positive outcomes data, will continue to cement, we believe Ocaliva's position in second line, irrespective of who is coming down the pike and of course we continue to be focused on generating new and exciting and differentiating data with Ocaliva on the PBC side.

Same thing on the NASH side. I mentioned in my remarks that we're obviously building on the very exciting interim month '18, interim analysis data in support of the NDA and launch. But we have -- having completed the outcomes cohort of REGENERATE close to 2,500 patients randomized. We're charging down the path for post-marketing readout on outcomes in NASH. So it's going to continue being exciting over the next few years.

Jay Olson -- Oppenheimer -- Analyst

Great. Thanks again for taking the questions.

Mark Pruzanski -- Chief Executive Officer

Thanks.

Operator

And our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is open.

Ross Weinreb -- Goldman, Sachs & Co. -- Analyst

Thanks for taking the questions, this is Ross on for Salveen. On the call you guys noted that the data from Phase 3 REGENERATE is going to be used to inform the payer decision. However, should we be expecting that the PRO and IT data to be part of the initial label or is it something that should be part of a more broader initiatives to elucidate the non-invasive diagnostic potential OCA? And then I have a follow-up.

Mark Pruzanski -- Chief Executive Officer

Yeah, I can't comment right now on the specifics of what's going to end up in the label, but definitely the PRO and then IT data we think are very important. [Technical Issue] they're being presented next week in Boston, there will be follow up publication on these data and a lot more data mining to do, to really understand the nuances and implications of these data. So I think more of the latter part of your question, this is going to be part of our broader educational effort and we're certainly going to leverage these data with our various stakeholders, payers, physicians etc.

Ross Weinreb -- Goldman, Sachs & Co. -- Analyst

Great. And then for Sandip. So based on the reversal in the 2Q ordering trends, how should we thinking about the underlying Q-over-Q demand change here and how this will play out into the fourth quarter?

Sandip S. Kapadia -- Chief Financial Officer

Yeah. Good thanks Ross for the question. I mean we had obviously a very solid quarter, where we saw good underlying demand growth even through the summer period. So we had good growth in the U.S., continued contribution of international as well. As you mentioned, this quarter we did see specialty pharmacy orders below the underlying IMS trends in the U.S., which was a reversal of what we saw the last quarter, which we had anticipated and indicated. So we increased our sales guidance for the balance of the year. So I mean, we have continued confidence. I think we're at -- we don't see any impact of potential trade inventory changes at least in the quarter four. But yeah, we see good strong growth, continued demand growth and thus we increased our sales guidance range from $245 million to $250 million.

Ross Weinreb -- Goldman, Sachs & Co. -- Analyst

Great. Thanks for the questions.

Operator

Our next question comes from the line of Brian Skorney with Baird. Your line is open.

Jack Allen -- Robert W. Baird -- Analyst

Hi, thank you for taking my questions. This is Jack dialing in for Brian. We wanted to drill down into the potential pricing discussion around PBC and NASH and we're wondering what levers we should think about as you are look to potentially implement differential pricing in PBC and NASH? And if the FDA potential approval of the 10 milligram dose and NASH has any effect in your ability to potentially implement differential pricing in the two indications? Thank you.

Mark Pruzanski -- Chief Executive Officer

Okay. Thanks for the question. First, as you know, we filed a separate NDA, and so the plan is of course to launch NASH under a different brand, which gives us some optionality, so we positioned ourselves to ultimately pursue the pricing option which maximizes the NASH launch, and also considers the overall long-term value with the franchise. Obviously, the label and some of the questions that you mentioned are not quite clear at this point, as we go through the process. So we'll plan to continue our work. The dialog with the payers, which are really an important input into that and finalize and communicate the overall pricing approach at the NASH launch.

Jack Allen -- Robert W. Baird -- Analyst

Awesome. Thank you so much.

Mark Pruzanski -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question is from the line of Steve Seedhouse with Raymond James. Your line is open.

Steven Seedhouse -- Raymond James & Associates -- Analyst

Yeah, good morning. Thank you. I just want to follow up on the indication based pricing discussion, is that easier in your opinion to achieve in the U.S. or in Europe? And then wanted also ask just as you're preparing for a potential AdCom and just thinking about the different issues, and questions you could arise. Wanted to get your thoughts on comfort with the risk of gallstones based on what you see in REGENERATE a business of academic literature just discussing the mechanism and risk of gallstones. Thank you.

Mark Pruzanski -- Chief Executive Officer

Yeah, I guess, I'll take the first step part. So regarding pricing, it's a different system obviously between the US and Europe, and the different markets in Europe have a different approach. So the mechanisms in Europe will be varied, some will look at it completely independent because it will be, by definition, a separate brand and will have its own discussion regarding the criteria that the individual international markets used to make their pricing decision, where in the U.S. will take the approach I outlined earlier.

Jerome B. Durso -- Chief Operating Officer

Yeah. With respect to your question about AdCom, I mentioned earlier that we're preparing for one if there is one of FDA decides to have one. I think in terms of the focus of interest at that AdCom, it would ultimately go to across the Board to efficacy and safety and overall benefit risk. Needless to say, we're obviously very confident based on all the data that we've seen in the favorable benefit risk profile of OCA, as the 25-milligram dose, the effective dose in this population with advanced fibrosis. You asked specifically about gallstones, it was something where we saw in numeric difference with more gallstones reported in patients, the OCA 25-milligram dose and there is a plausible mechanism that you alluded to in a recent publication. To the extent that the signal proves to be real, we would think that it's probably a class effect of FXR. But again gallstones are very common in this patient population and imminently manageable in the vast majority of patients. So from our perspective, that particular signal doesn't alter our view of benefit risk.

Steven Seedhouse -- Raymond James & Associates -- Analyst

Thanks very much.

Mark Pruzanski -- Chief Executive Officer

Thanks.

Operator

Thank you. And our next question comes from the line of Alan Carr with Needham & Company. Your line is open.

Alan Carr -- Needham & Company -- Analyst

Hi, thanks for taking my questions. You talked earlier about 150% sales force, but also a contract sales force, I wonder if you could talk more about the potential scale that and timing around building that -- the decisions that go into building it. And then also, can you go over the relative opportunity in Europe, and I guess the amount that you expect to invest there, in your own commercial infrastructure? Thanks.

Mark Pruzanski -- Chief Executive Officer

Okay, thanks. As I mentioned in the prepared remarks, we have earlier, sorry last month implemented the first group of our contract sales organization team that's out there doing education. It's really been a part of our sales force model for a while in PBC, that we keep a portion of our overall sales team from a contract group. It gives us some flexibility and some opportunity to pulse when we need to. I think the way to think about that group is, it's a compliment ultimately to the 150, internal sales team that we will ramp up to -- for the launch we'll continue to look, how to use the different levers effectively. We will be progressively adding bulk to the contract group and to the internal team, as we move forward through the launch as per our plan.

Alan Carr -- Needham & Company -- Analyst

Specific details at this point on the size of the contract sales force?

Mark Pruzanski -- Chief Executive Officer

Yeah, will give some more deep. Yeah, we'll give some more details on kind of the ramp up of process and the sizing when we get to the event. But the way to think about it again, is that, ultimately at launch the majority of our effort will come from that internal team of approximately 150 Intercept territory business managers.

Alan Carr -- Needham & Company -- Analyst

Okay. And then for Europe?

Mark Pruzanski -- Chief Executive Officer

Yeah. So Europe, I mean if you look at the prevalence data there is potentially similar numbers of patients in the European market. Obviously, you know there will be the normal process in Europe around pricing and reimbursement, which will take some time, we'll look at our investment plan to take advantage of the opportunity, but also to move through on the milestone basis, you have different timing. First on the regulatory front, as we get ready to file later this quarter and then you look market by market at the right way to ramp up the individual markets based on the reimbursement process that exists in that individual market. So the nice significant opportunity in Europe which will tackle progressively, but obviously the first focus in the first market in terms of chronology will be the U.S. market.

So I think it's important on the Europe, just one last thing, the important consideration on Europe as we did build up our internal infrastructure in the key European markets where the PBC launch. So like the U.S., when we talk about flexing up the resources, same kind of process there where we start with an infrastructure and with a real good strong teams and sound relationships with the key stakeholders in these markets.

Alan Carr -- Needham & Company -- Analyst

To what extent are you open to co-marketing or out-licensing type arrangements in the parts of Europe?

Jerome B. Durso -- Chief Operating Officer

Yeah, Alan we've said before that, we're very open minded with respect to strategic options if there is a like-minded company, that can accelerate access to patients in need. We're very open to that possibility.

Alan Carr -- Needham & Company -- Analyst

Great. Thanks for taking my questions.

Mark Pruzanski -- Chief Executive Officer

Thanks, Alan.

Operator

Thank you. Our next question is from Liisa Bayko with JMP Securities. Your line is open.

Liisa Bayko -- JMP Securities -- Analyst

Hi, thanks. Majority of my questions have been answered, but I guess just the probe a little bit more on your discussions with payers -- not on pricing, but really that the use of biopsy. I mean, where are they at in terms of either wanting to see a biopsy or they kind of at this point pretty comfortable with your -- the non-invasive approaches? Thanks.

Mark Pruzanski -- Chief Executive Officer

Okay, thanks for the question. I mean I think as we've been indicating, we believe NITs are the best way frankly to diagnose the advanced fibrotic patient in the real world, given all the challenges around biopsy. I think if we think about the conversations and the learnings we've had from payers, they are obviously well aware of the NITs that are available for assessing fibrosis in liver disease, partially clearly thanks to their experience in hepatitis C, where the use of NITs on the payer side is a rather consistent approach in many of the large payers. So we see this momentum continue with the payers. We're in the middle of -- as you can imagine, all of those discussions now, but the momentum in the overall market is encouraging.

It's also evident that the large REGENERATE data sets going to be key in those discussions. And so it's great to see that the NIT data specific OCA begins to emerge at the meeting in Boston next week, and that will really be an important part of the overall dialog with them. And again, I think payers understand that there is this group of advanced patients that they're most concerned about -- that all already being identified primarily through non-invasive means in the practice setting today. And then also of course, looking to what the key opinion leaders are saying, so the fact that more data is emerging all the time and KOLs are clearly behind this -- this is going to be another important dimension, when we think about the payer dialog between now and launch.

Liisa Bayko -- JMP Securities -- Analyst

Thank you.

Jerome B. Durso -- Chief Operating Officer

Thanks, Liisa.

Operator

Thank you. And our next question is from Joel Beatty with Citi. Your line is open.

Joel Beatty -- Citi -- Analyst

Hi, thanks for taking my questions. The first one is, could you provide any thoughts on whether the labeling would be based on fibrosis stage? And then secondly, could you discuss the potential upon the initial approval expected next year, to use OCA to treat NASH patients with F4 fibrosis. I realize that's still being studied in the REVERSE study. But until those results come, it seems like will be another alternatives for those patients. Thanks.

Mark Pruzanski -- Chief Executive Officer

Yeah, so with respect to your first question, yeah, I'd point out again that our breakthrough designation is in NASH patients with fibrosis. And we wouldn't necessarily anticipate a stage specific indication, but we'll see -- can't comment on where we're going to end up exactly in the label. I think post-launch and F4s, I mean it is a separate population of patients we study in REVERSE, I mentioned in my prepared remarks versus the only such a Phase 3 study that's ongoing right now, it's a very important segment of the market with the highest unmet need. I think again a positive outcome in that study, positive result in that study will support an expansion of the indicated use of the drug in this segment and further differentiate it. But in the initial phase we'll launch, this is not a segment of the population we would be targeting.

Joel Beatty -- Citi -- Analyst

Thank you.

Operator

Thank you. And our next question is from the line of Jim Birchenough with Wells Fargo. Your line is open.

Jim Birchenough -- Wells Fargo -- Analyst

Hey guys, thanks for fitting me in. And apologies, I joined a little late. But a couple of questions just on Ocaliva, Mark, what are the drivers for growth going forward? If it's territory expansion maybe speak to territories where we're further behind if it's expansion of market share in Europe versus U.S. Could you maybe tell us where we're at market share wise Europe versus US? And then in the U.S. what segments are you missing right now that you think you can get to and I've got a follow-up.

Mark Pruzanski -- Chief Executive Officer

Sure. Thanks, Jim. So look, as we said in our call, we're thrilled with the continued momentum in the business around the world. I'll ask Jerry to comment on the specifics.

Jerome B. Durso -- Chief Operating Officer

Yeah, I guess a couple of maybe items as we've mentioned throughout we see good underlying demand continue in the U.S. market. We still see as we've expanded the reach into a larger group of GI physicians that the broader community-based GI physician who may only have one or two or three PBC patients is willing to prescribe for those patients once they get the appropriate information. So we do see a continued opportunity to expand. I think it's also important the majority of patients out there in all markets frankly, that are eligible for OCA according to our second-line treatment don't -- haven't received it yet. So there is still just a strong organic opportunity.

I did reference in the prepared remarks that really encouraged to see what's happening in the international markets where we see good -- we launched later. So we are earlier into the launch phase in many of those markets, but we see a good solid growth prospects continue. And then, yes, there is opportunities as we've expanded beyond the classic European markets. So I think you see it, we're still relatively early frankly from a volume standpoint in the PBC opportunity and we'll look to leverage that in appropriate way as we move forward.

Mark Pruzanski -- Chief Executive Officer

The other thing I'd add Jim is -- which really encouraging to see is -- long-term adherence rates that continue to improve. We've got better adherence with Ocaliva than first line. And also, physicians are getting more and more valuable experience with the drug. So those who have the most experience prescribing Ocaliva, the vast majority have a positive experience with the drug. And again, as Jerry said earlier, this is the core group of physicians who will be prescribing for NASH.

Jim Birchenough -- Wells Fargo -- Analyst

And then maybe just on the non-invasive testing, I'm just trying to understand the strength of the evidence and support of non-invasive testing. Could you maybe speak to the ability of non-invasive testing to discern REGENERATE patients from REVERSE patients or those eligible for REGENERATE in those that were ineligible? If you have numbers on positive predictive value, negative predictive value, you said every specificity. Just trying to understand the strength of non-invasive testing data?

Mark Pruzanski -- Chief Executive Officer

Yeah, it's exactly the right question. And I'm happy to say that based on the data mining we've done in our own data set and actually a recent really strong publication from Gilead, the STELLAR 3 and STELLAR 4 studies. You can see pretty robust sensitivity specificity, particularly when you use these tests together, right? So two sequential non-invasive tests including standard commonly used sort of logic tests that are available to all physicians out there, and also things that are growing in use like trends in elastography ultrasound based technique. And so we are confident bottom line that these tests are accurate enough to discern, to identify patients with advanced fibrosis and help -- also helpful in addition to the other very standard work up, a physician would do to identify and distinguish from cirrhotic patients.

Jim Birchenough -- Wells Fargo -- Analyst

Great. Thanks for taking the questions.

Mark Pruzanski -- Chief Executive Officer

Thanks Jim.

Operator

Thank you. And our final question comes from the line of Navin Jacob with UBS. Your line is open.

Navin Jacob -- UBS Investment Bank -- Analyst

Hi, thanks for taking the question. Can you hear me OK?

Mark Pruzanski -- Chief Executive Officer

Yeah.

Navin Jacob -- UBS Investment Bank -- Analyst

Okay, great. Thanks. So just, Sandip, maybe going into 2020 help -- if you can help us understand how we should be thinking about expenses as you ramp your sales force, your marketing expenses, all associated with the impending hopeful launch of NASH. Any kind of color on some of the dynamics, we should be thinking about? And also as it relates to any other line item for 2020 BG [Phonetic], COGS or tax rates and so on and so forth?

Mark Pruzanski -- Chief Executive Officer

Sure. Thanks for the question. I think I mean it's obviously a bit early to give guidance for 2020, we will do that at a later point. But what I can say is, look, we've, as Jerry mentioned, we've completed a large part of the infrastructure build as we're going through this year in terms of the medical organization, the payor organization. And you can see our spend has increased as a result of it. The key additional investment for -- as we get toward either the later part of this year, certainly for next year is the sales force expansion, our internal sales force expansion, which would be the key investment as we think about next year, along with probably some additional resources to continue education, probably required in the market, but they will provide greater clarity as we -- certainly, as we get closer to the next year, but hopefully that gives you something.

Lisa DeFrancesco -- Vice President, Investor Relations

Okay?

Mark Pruzanski -- Chief Executive Officer

Yeah, I think. Thanks very much. I think we've run a little bit over time, operator. So, we'll call it there. Thanks everyone for dialing in. We've had a great year so far. We look forward to driving to -- toward the NASH launch next year and see many of you in Boston later this week.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Lisa DeFrancesco -- Vice President, Investor Relations

Mark Pruzanski -- Chief Executive Officer

Jerome B. Durso -- Chief Operating Officer

Sandip S. Kapadia -- Chief Financial Officer

Emma Nealon -- Alethia Young -- Analyst

Brian Abrahams -- RBC Capital Markets -- Analyst

Michael Yee -- Jefferies -- Analyst

Ritu Baral -- Cowen and Company -- Analyst

Yasmeen Rahimi -- ROTH Capital Partners -- Analyst

Jay Olson -- Oppenheimer -- Analyst

Ross Weinreb -- Goldman, Sachs & Co. -- Analyst

Jack Allen -- Robert W. Baird -- Analyst

Steven Seedhouse -- Raymond James & Associates -- Analyst

Alan Carr -- Needham & Company -- Analyst

Liisa Bayko -- JMP Securities -- Analyst

Joel Beatty -- Citi -- Analyst

Jim Birchenough -- Wells Fargo -- Analyst

Navin Jacob -- UBS Investment Bank -- Analyst

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