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Edited Transcript of BIOD earnings conference call or presentation 15-Mar-18 12:30pm GMT

Thomson Reuters StreetEvents

Q4 2017 Albireo Pharma Inc Earnings Call

DANBURY Mar 16, 2018 (Thomson StreetEvents) -- Edited Transcript of Albireo Pharma Inc earnings conference call or presentation Thursday, March 15, 2018 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Paresh N. Soni

Albireo Pharma, Inc. - Chief Medical Officer

* Paul J. Arndt

LifeSci Advisors, LLC - Head of IR and MD, Communications

* Ronald H. W. Cooper

Albireo Pharma, Inc. - CEO, President and Director

* Thomas A. Shea

Albireo Pharma, Inc. - CFO and Treasurer

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Conference Call Participants

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* Antonio Eduardo Arce

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Biotechnology Analyst

* Laurence Alan Carr

Needham & Company, LLC, Research Division - Senior Analyst

* Patrick Edward Dolezal

LifeSci Capital, LLC, Research Division - Associate

* Ritu Subhalaksmi Baral

Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst

* Vasiliana Vireen Moussatos

Wedbush Securities Inc., Research Division - MD of Equity Research

* Yasmeen Rahimi

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

* Yu Xu

William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research, Partner & Biotechnology Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentleman, and thank you for joining us for Albireo's financial results conference call to review results for the fourth quarter and year-end of 2017. (Operator Instructions)

I would now like to turn the call over to Paul Arndt from LifeSci Advisors, representing Investor Relations for the company. Please go ahead, sir.

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Paul J. Arndt, LifeSci Advisors, LLC - Head of IR and MD, Communications [2]

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Thank you, and good morning, everyone. Thank you for joining today's call, which management will discuss Albireo's financial results for the fourth quarter and year-end 2017 and provide a business update. Earlier today, Albireo issued a press release announcing its results. The press release is accessible via the company's website at www.albireopharma.com.

Before proceeding, let me mention that comments today may include forward-looking statements made under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements other than statements of historical fact regarding the plans for or progress, scope, cost, duration or results of development of A4250, elobixibat, A3384 or any other Albireo product candidate or program, including the target indications for development, size, design, population, location, conduct, objective, duration, endpoints, timing for initiation or completion of or for reporting the results from or regulatory feedback regarding any clinical trial, including Albireo's planned Phase III trial of A4250 in patients with PFIC, the commercial outlook for any Albireo product candidate or program or opportunity in any target indication, any payment that HealthCare Royalty Partners or EA Pharma may make to Albireo, the period for which Albireo's cash resources will be sufficient to fund its operating requirements or Albireo's plans, expectations or future operations, financial position, revenues, costs or expenses.

Actual results may differ materially from those expressed or implied by any forward-looking statement as a result of many factors, including those described under the heading, Forward-Looking Statements in Albireo's press release from earlier today or under the heading, Risk Factors in its most recent Form 10-K or in later filings with the SEC.

Albireo cautions you not to place undue reliance on any forward-looking statement. Also, any forward-looking statement that is made speaks only as of today, Thursday, March 15, 2018, and should not be relied upon as representing Albireo's views as of any future date. Albireo disclaims any obligation to update any forward-looking statement except as required by law.

With that, I'll turn the call over to Ron Cooper, Albireo's President and Chief Executive Officer.

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [3]

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Thank you, Paul, and thank you, everyone, for joining today's conference call. With me today is Tom Shea, Albireo's Chief Financial Officer; and Paresh Soni, Chief Medical Officer.

We have made tremendous progress at Albireo over the last year, plus having generated an important clinical data engaged in a successful dialogue with regulatory authorities towards beginning a Phase III trial with our lead asset and bolstered our financial position to where we speak to you today with the current cash balance of approximately $200 million.

So allow me to provide some details on our accomplishments in 2017. Probably the most important achievement was the successful completion of a Phase II dose finding trial of our lead product candidate, A4250, and IBAT, or ileal bile acid transporter inhibitor in children with cholestatic liver diseases and pruritus. This study was accepted by EASL as an oral late-breaking embargo presentation, and later in the year was recognized with a poster of distinction at both the AASLD and the NASPGHAN conferences. This study sets the stage for our planned Phase III trial in patients with the rare and highly debilitating genetic disorder known as PFIC, or progressive familial intrahepatic cholestasis, which we expect to initiate this spring.

2017 also saw us agree with the European Medicines Agency's Pediatric Committee on a pediatric investigation plan for A4250 in PFIC, an essential step for potential EU marking authorization application. We were also successful in expanding our stockholder base with the completion of Albireo's first underwritten public offering in The United States.

These achievements position us well for 2018 and the year is off to a great start. In January, our licensee, EA Pharma, received regulatory approval of elobixibat to treat chronic constipation in Japan, marking the first approval of an IBAT inhibitor anywhere in the world and triggering more than $55 million in nondilutive royalty monetization and milestone payments to us. We subsequently generated approximately $94.1 million in net proceeds from first quarter equity transactions, further strengthening our financial position and providing a solid foundation on which to capitalize on our promising pipeline of innovative treatment for orphan pediatric liver diseases and other liver and gastrointestinal disorders and diseases.

Let's begin with a brief business update. I'll start with our Phase III product candidate, A4250, which we are developing initially to treat patients with PFIC and plan to expand development into other orphan pediatric cholestatic liver diseases. PFIC is a rare genetic disorder associated with elevated bile acid level and highly debilitating pruritus.

As an IBAT inhibitor, A4250 was designed to divert bile acids that would otherwise recirculate from the small intestine to the liver and to thereby reduce bile acids in the liver and serum. As I mentioned earlier, another Albireo IBAT inhibitor, elobixibat recently became the first IBAT inhibitor approved anywhere in the world, which we see as validating both the therapeutic potential of the mechanism and our scientific leadership.

PFIC causes progressive life-threatening liver disease with symptoms commonly developing in the first month of life, and there is currently no approved drug option. Instead, first-line treatment is typically an off-label medication that is used in the hope of symptomatic relief and many patients require surgical intervention, either a procedure known as bile diversion surgery, in which bile acids are diverted to a stoma bag outside the body or a liver transplant. Bile diversion surgery, which accomplishes surgically what A4250 could do pharmacologically, has been reported to lead the positive clinical outcomes in PFIC patients. Thus providing proof-of-principle for the IBAT inhibition mechanism and supporting our choice as PFIC as the lead indication for A4250.

After completing a successful Phase II pediatric study with A4250 in 2017, we set out to design and optimize our Phase III program, which includes a single randomized double-blind placebo-controlled multicenter clinical trial designed to enroll approximately 60 patients with PFIC type 1 or 2 and an open label extension study to assess long-term safety and durability of response.

The double-blind trial, which is fully funded, will evaluate 2 doses of A4250 for 24 weeks. The primary endpoint for FDA evaluation and a key secondary endpoint for EMA evaluation will be assessment of change in pruritus. The primary endpoint for EMA evaluation and a key secondary endpoint for FDA evaluation will be serum bile acid responder rate. The trial will also have several additional secondary endpoints. We're on track to start our Phase III trial this spring and assume with this time line expect data will be available by the end of 2019.

The Phase III trial, together with available data from the then ongoing extension study, are expected to form the primary support for drug approval applications for A4250 in both the U.S. and EU for the treatment of patients with PFIC. We anticipate additional support to come from an independent research study that we are supporting, which pools and analyzes long-term historical PFIC patient data to provide insight into the natural history of the disease and potential correlations with biomarkers.

We believe that A4250 has the potential to become a useful tool for physicians in the treatment of pediatric cholestatic liver disease, and we intend in the future to generate data beyond our planned Phase III program in PFIC to support its expanded usage.

Let me now move to our pipeline program. Already in 2018, we had had great news with elobixibat in Japan. In January, we announced an agreement with a leading health care investment firm, Healthcare Royalty Partners to monetize our royalty rights for Japan under our license agreement with EA Pharma. A few weeks later, this agreement bore fruit when elobixibat was approved for the treatment of chronic constipation in Japan. The Japanese approval triggered more than $55 million in payments to us between Healthcare Royalty and EA Pharma. We're also eligible for an additional $15 million under the Healthcare Royalty agreement if a specified sales milestone is achieved.

Moreover, we regain our royalty eligibility under the EA Pharma Agreement if Healthcare Royalty receives a maximum amount of 175% of this amount paid to us. Now we have no current plan to conduct development of elobixibat in the rest of the world as the treatment for chronic constipation based on commercial consideration. We do, however, believe elobixibat has potential benefit in the treatment of NASH. Studies have indicated that among other things, NASH patients has elevated bile acid level, elevated cholesterol, insulin resistance, liver inflammation and liver fibrosis, and we have clinical and preclinical findings with elobixibat or another IBAT inhibitor that show a beneficial impact on these parameters. We have a two-pronged approach to NASH that includes a potential Phase II study with elobixibat and a preclinical program with novel bile acid modulators. We expect to initiate the trial with elobixibat in the first half of 2019 assuming issuance in the U.S. of a method of use patent that's currently pending. With this two-pronged approach, we believe we have the making of a compelling NASH program.

Our third promising clinical stage product candidate, A3384, is a proprietary formulation that is designed to overcome the limitation of an established bile acid sequestrant known as cholestyramine. By releasing it directly into the colon to treat bile acid malabsorption, or BAM, a condition marked by high levels of bile acids in the colon and chronic watery diarrhea. We previously generated these 2 proof-of-principle data with a prior formulation of A3384 in BAM and subsequently completed a successful formulation optimization program.

If our pending formulation related patents for A3384 are issued in The United States, we're considering taking the optimized formation into the clinic to evaluate it as treatment for BAM. If we decide to do so, we would expect to start an A3384 trial in the first half to 2019. With success in the clinic and regulatory approval, A3384 could be the first treatment approved for the treatment of bile acid malabsorption in The United States.

So to summarize, with A4250 on the cusp of Phase III initiation in an orphan indication, for which there is no approved drug option, our current cash balance of approximately $200 million and our pipeline of promising bile acid modulators, Albireo is poised for a success in 2018 and beyond.

With that, I'll turn the call over to Tom for a financial update, and then we will be happy to take your questions. Tom?

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Thomas A. Shea, Albireo Pharma, Inc. - CFO and Treasurer [4]

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Thanks, Ron. Let me quickly highlight our financial results for 2017, which we released earlier today. We ended 2017 with the balance of $53.2 million in cash and cash equivalents. Subsequently, we received approximately $149.1 million in royalty monetization and milestone payments triggered by the approval of elobixibat for the treatment of chronic constipation in Japan and net proceeds from the equity offering resulting, as Ron said, in a current cash balance that approximate $200 million.

Our revenue for 2017 was nominal compared to $11.4 million for 2016. Our revenues in 2016 were generated entirely from our license agreement with EA Pharma. We do not have any milestone revenue in 2017. Our research and development expenses for 2017 were $13 million compared to $8.1 million in 2016. R&D expense increased primarily due to clinical and manufacturing costs related to A4250.

Our G&A expense for 2017 was $15.2 million compared to $15.8 million in 2016. This decrease was primarily due to professional fees and severance costs incurred in 2016 in connection with the Biodel transaction, partially offset by increased personnel and stock-based compensation costs in 2017.

Other income for 2017 was $3.8 million compared to other expense of $3.9 million for 2016. The difference was primarily due to the 2017 sale of certain legacy intellectual property acquired in the Biodel transaction along with the conversion of convertible notes into common stock and connection again with the 2016 completion of the Biodel transaction.

Our net loss for 2017 was $24.6 million or $3.15 per share compared to $16.4 million or $13.19 per share in 2016. Based on our current operating plans, we anticipate our operating expense for 2018 to be in the range of $45 million to $50 million, with the expected increase over 2017 driven primarily by the execution of our planned global Phase III clinical study of A4250. From a cash standpoint, we expect our current resources will be sufficient to meet our operating requirements at least into 2021.

And with that, let me turn the call back over to Ron for some concluding remarks.

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [5]

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Good job, Tom. Thank you. So as we've outlined for you today, Albireo has made great progress in 2017. And we're off and running in 2018 with the elobixibat approval in Japan and a substantial capital influx as we're near the initiation of Phase III with A4250.

And now we'll be happy to take any questions you may have. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Liana Moussatos with Wedbush Securities.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [2]

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You mentioned the Phase III PFIC program starting in spring, but A4250 also worked in other cholestatic liver diseases like Alagille. You have any plans for clinical work in those diseases? And you mentioned using $24.2 million, I think, in the press release of the ATM. Is there anything left?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [3]

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Okay. Thanks for the kind comments, Liana. Let me address the first part of the question, and I'll let Tom address the question in regards to the ATM. I think we spent the last couple of years designing our A4250 PFIC trial. We've been able to get good feedback from the regulatory authorities, and we're pretty excited to be up and going into the spring with the trial in PFIC. Our approach for the other indications is moving along as well. I think you know that we showed some promising data in Phase II in the other indications. And what we're doing now is -- Paresh and the team are spending a lot of time with key opinion leaders really making sure that the next study design sets us up for success. The other diseases are similar, but the patient populations are a bit more heterogeneous. So we're looking at what's the right endpoint, what's the right patient population. And until we're comfortable the feedback that we have and we have a good design, we won't be proceeding until that time, but we plan to go forward generating data in many of these other indications. Tom?

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Thomas A. Shea, Albireo Pharma, Inc. - CFO and Treasurer [4]

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Yes, the ATM we put in place was a $15 million ATM, so we do have approximately $25 million remaining.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [5]

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And the $15 million sales milestone, will that go to Healthcare Royalty Partners?

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Thomas A. Shea, Albireo Pharma, Inc. - CFO and Treasurer [6]

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The $15 million milestone is from Healthcare Royalty to us, if EA Pharma achieves certain sales threshold. If that sales threshold is achieved, that $15 million we will receive from Healthcare Royalty.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [7]

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Okay. And it's 5-0, not 1-5?

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Thomas A. Shea, Albireo Pharma, Inc. - CFO and Treasurer [8]

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No, no, 1-5.

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Operator [9]

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Our next question comes from Katherine Xu with William Blair & Co.

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Yu Xu, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research, Partner & Biotechnology Analyst [10]

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As we are starting -- you are starting the Phase III study PFIC, can you talk a little bit more in detail what are the major issues you're tackling leading to the start of the study? I understand there is the perfection of the pruritus (inaudible) and things like that, but we'd love to hear some details on that? And also, you took off elobixibat in NASH. Can you talk about the patent of use, that method of use, the patent term? And also what's your vessel areas, U.S., Europe? Do you have NASH rights in Japan? And it's actually too smart to actually that (inaudible), but just curious about whether diarrhea would be a problem? And lastly, from your research, elobixibat versus 4250, which one is better in NASH? I understand that you are not -- it is not practical to push 4250 into NASH, for some reasons? But just curious about from a scientific and product profile perspective, which one is better?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [11]

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Okay. Katherine, thanks for those questions. So first of all, your questions were on A4250 around, just to make sure I'm getting them, the major issues for starting elobixibat, NASH, patented areas and then which indication Paresh and I worked together on those ones. So I think that for the A4250 trial start, actually there are no major issues. It is completely around logistics. So from a patient perspective, Paresh and the team retained our CRO at the end of 2016, top quality CRO. We've actually done a lot of feasibility, and we pretty much know where all the patients are. From a regulatory perspective, as I said, we've had a robust dialogue with both regulators, and they've been fantastic in working with us. They've given us good feedback, but we're good to go from a regulatory perspective. So really, all of it is about blocking and tackling. And I'll remind you while the study is 60 patients in some ways a small study. In other ways, it's a large study because it's a global study. We are in multiple countries, multiple sites. And in those countries, in each place, we have epic regulatory and contract to get through. And so that's what we're actually following through. We've hired a top quality person to lead that effort for us. The person leads our (inaudible) effort. So we're well on track. And so we're pretty confident about our start in the spring of this year. Anything else to add on that question that I covered?

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Thomas A. Shea, Albireo Pharma, Inc. - CFO and Treasurer [12]

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No, I think you covered it.

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [13]

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Okay. So let's then talk about NASH. I think we're excited about the potential of our -- of IBAT inhibition in NASH. I think it is something that is not fully appreciated yet. But I think in NASH, when you think of the hallmarks of NASH, cholesterol problems, glucose transport problems. liver inflammation, liver fibrosis and even in recent publication our comments about elevated bile acids in NASH patients. We think that we could be very interesting assets. So it's two-pronged approach. As I mentioned in my comments, elobixibat well-characterized drug, over 1,000 exposures taking that into NASH and the preclinical assets. From a patent perspective for elobixibat, we expect the method of use patent to be issued this year in NASH. We already have that patent for A4250. So we are hopeful that we will receive that patent as well. And then from a rights perspective, we have all of the rights all over the world except for EA Pharma, they have the right for elobixibat for Japan and 5 other countries in that area. Paresh, maybe you want to talk about the 2 compounds in NASH?

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Paresh N. Soni, Albireo Pharma, Inc. - Chief Medical Officer [14]

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Yes, sure. Thanks, Katherine. You mentioned the possibility of diarrhea with elobixibat in NASH patient. So we have a large safety database and large efficacy data base with elobixibat. We've treated more than 1,000 patients in multiple clinical trials. So we have quite a large body of safety data and efficacy data in chronic constipation. And this goes across a range of doses, but I think from a very low doses to a much very high doses, and the approved dose -- including the approved doses in Japan. And we think we can get a dose that gives you the right therapeutic window and therapeutic index for efficacy and based on metabolic parameters that we've looked at and a low incidence of diarrhea. But also, when you look at the diarrhea with elobixibat, it starts with a very -- the first few days and it's transient. The discontinuation rate from diarrhea is not high with elobixibat. So when we look at that, we've also looked at data from a Phase I study that showed good effect of metabolic parameter, including LDL cholesterol lowering. As you know, these molecules, IBAT inhibitors were first developed for cholesterol lowering, so -- and improvements in GLP-1 also that we've seen which indicates improvement in insulin sensitivity. So it's a good rationale for elobixibat. We think we have a good efficacy profile and the safety profile is not of concern to us. In terms of the 2 molecules, A4250 versus elobixibat, again, we've spent quite a bit of time profiling these 2 molecules looking at them particularly in Phase I studies and in other efficacy studies that we have done. And A4250 is more potent and we'd like to keep that for pediatric cholestatic liver diseases, which -- where it's shown a very good effect as you know and a very good tolerability profile thus far related to any adverse event in our Phase II study and even in the Phase I study. So that we think has a good profile -- clinical profile for pediatric cholestatic liver disease. NASH is probably better suited for elobixibat, which is a bit less potent and has a lot of safety data. We can actually go into a Phase II study with NASH without having to do any other work like Phase I work or preclinical tox work because we have a large body of data behind it. So we think that, that will be a better molecule for study in NASH patients.

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Operator [15]

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Our next question comes from Alan Carr with Needham & Company.

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Laurence Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [16]

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Couple of them. Just to clarify your plans for A4250 and biliary atresia and Alagille, that may not happen in 28 (sic) [2018] and it might be in 2019. And then also, what's the -- I guess, what's still being worked on when it comes to 3384? Why no start for bile acid malabsorption in the first half of '19 as opposed to this year? And the last one is, you mentioned that you'll have data from the Phase III A4250 and PFIC end of '19. What else might you be needed -- might need for NDA submission, anything else that might push the NDA submission out substantially past that point?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [17]

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Thanks for your questions, Alan. I think -- let me answer your question by -- the first 2 questions really around prioritization of the organization and making sure we have operational excellence. We believe that there is a tremendous opportunity with A4250. And so -- and we really want to make sure we get that first indication as quickly as possible. So the priority for the organization is to get that PFIC trial up and going, get it enrolled as quickly as possible. And so that's where we're spending the majority of our resources and time via the -- both the initiation in other indications in A3384 are important things that we are going to be doing, but they are secondary to that first objective. And so starting a second indication either in biliary atresia, Alagille or something else is really gaining against being comfortable with the study design, gaining against the dialogue that we're having with key opinion leaders. And I'll assure you, we're having a very active dialogue and we've got a number of ad boards. We just want to make sure we get it right. So we've guided for a start in the first part of '19. But to be honest, it really is about making sure we get it right. And then the same thing in regards to A3384, we are working on the development program. We are working on a good design for A3384. We plan to engage the regulators, but that is secondary to making sure we get up with A4205 with the PFIC trial, and we've guided there a start in the first half of 2019 as well. And then to your question regards to what we will need from a regulatory perspective after we have the top line data for the A4250, the PFIC trial, which we guided that we should have by the end of 2019. The regulators have said to us that they expect -- they're going to look at the totality of the data. So what's going to be important, what they'll need is that study, so the 60 -- approximately 60 patients in the Phase III study. All of those patients will roll into a long-term open-label observation study. So whatever data we have at that time, we'll have to submit. And the third thing they've asked for us is some natural history data. And we support an independent group, which is generating that data. So all of those things should be on track for being ready for once we have the top line data and be able to make the submission on time. That answers your question?

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Operator [18]

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Our next question comes from Ritu Baral with Cowen.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [19]

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On to your elobixibat NASH program, what do you anticipate your first Phase II trial to look at structure wise and point wise? Are you getting ahead straight into a biopsy? Or would you consider an imaging endpoint like PDFF? And then do you feel confident enough in the safety profile to not do any safety work and, say, not hold patients ahead of time?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [20]

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Thanks for the questions, Ritu. I think I'll start with the second comment. I think we're extremely confident about the safety profile because I think if you think about the beauty of our mechanism in general, now in the 20 years of history that our team has been working with these bile acid modulators. The fact that they are nonsystemic, theoretically confers a really great safety profile. But then if you look -- start looking at the clinical data both across elobixibat and A4250, and we've never seen any single events of any sort. If you look at the data with elobixibat, we have long-term data with elobixibat over a year. We also have over 1,000 exposures. So I think that we are very confident about the safety aspect of things. In regards to design part, let me have Paresh to comment on that, but the short answer to that is it's still work in progress.

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Paresh N. Soni, Albireo Pharma, Inc. - Chief Medical Officer [21]

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Yes. I think that summarizes it, Ron. We've just started looking at elobixibat for NASH and thinking of trial designs, and we're starting to talk to external group and experts. So we haven't made a decision yet as to whether what kind of study design it will be and what will be the primary endpoint. It will likely, obviously, include imaging markers and a lot of serum markers, but whether it will include a biopsy or not, it's something we're still under discussion.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [22]

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What is your current inclination on where this would fall in the paradigm, whether earlier stage F0-F1 patients? Or whether the mechanism would provide better utility in sort of F3 patient?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [23]

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Yes, I think that's really a great question, Ritu. I think for me, what I think we're excited about is when we talked to key opinion leaders and let me reflect their comments to us. The key opinion leaders are saying to us that they're excited, there's a lot of compounds that are having being developed with NASH. They believe there is going to be a lot of changes in the treatment paradigm overall, and they're not exactly sure which is the mechanism that makes the most sense, but what they look at is from a patient perspective and from a utility perspective. And when you look at NASH patients, in general, they have other things going on as well, right? So many of them will have diabetes, high cholesterol, high blood pressure. They are on multiple medications. They have comorbidities. They are pretty excited about the fact that our medicine is, in general, nonsystemic, and the ability to use a bile acid modulator mechanism across the various stages either as monotherapy or in combination with something else, I think, intrigues us. So that's the -- getting back to your earlier comment about the -- to your perceived safety profile that we've had in the data that we've had plus the fact that we are nonsystemic when we talked to the key opinion leaders are very much intrigued about our approach.

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Operator [24]

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Our next question comes from the line of Yasmeen Rahimi with Roth Capital Partners.

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Yasmeen Rahimi, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [25]

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Two questions. Question one is on recently Arun Sanyal published a paper that shows that different compositions of bile acids have different pathogenesis effect on -- in NASH. So with that in mind, what is your thought process about -- as an IBAT inhibitor on changing the composition of bile acids? And then the second question is given the fact, although we don't know if Shire has officially started enrollment. But according to clinicaltrials.gov, they are planning to do a study in 150 patients. But do you believe that with that potential study, if it is initiated in the next upcoming months that there would be any sort of delay in your timelines of completion of enrollment given the fact that they are trying to enroll 150 patients?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [26]

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Thank you, Yasmeen. I appreciate your questions. Each day, we have a lot of excitement about our approach around NASH. And I'll just remind everybody that right now what we're trying to do is get A4250 up and going in the PFIC trial, so that it can be used in PFIC and then generate data across some of the other indications. In general, I would consider our NASH work, both the preclinical work and elobixibat work, in its formative stages, right, but we will get to that as the year goes on. But Paresh maybe you can address Yasmeen's comments?

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Paresh N. Soni, Albireo Pharma, Inc. - Chief Medical Officer [27]

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So thanks, Yasmeen. Yes, we're actually very excited to see the paper by Arun Sanyal's group, which actually is very much in line with our hypothesis and our thinking about the role of bile acids in NASH and especially progressing from -- as you may have seen in that paper from controls to NAFLD to NASH that you see a great -- you see more significant changes in bile acid levels and even as you get to most of your disease and fibrosis, you see a change in the composition of the bile acids and the change in the quantity of bile acids, which is telling you -- and basically IBAT inhibitors are designed to effectively reduce the bile acid load in the liver by blocking the enterohepatic circulation. So it actually really supports our hypothesis that using bile acids -- using IBAT inhibitors will have a beneficial effect in NASH and obviously it needs to be proven in a well-controlled and adequately designed trial. But we have shown in our earlier studies both with A4250 and with elobixibat that we see a beneficial changes in bile acid composition, and we see reductions in serum bile acid level. We haven't measured liver bile acid levels, obviously. But this bodes well for us in terms of the rationale of studying IBAT inhibition in NASH.

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Operator [28]

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(Operator Instructions) Our next question comes from the line of Ed Arce with H.C. Wainwright.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Biotechnology Analyst [29]

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I had one question around the NASH program, probably it's been asked in a couple of ways before, but I just wanted to really focus on the effects that you expect to see and sort of how you see this fit? I mean I understand your rationale with IBAT inhibition and bile acid reductions and your focus around comorbidities and the nonsystemic nature of the safety. But specifically with the elements of NASH, how do you see this as more of a -- perhaps an anti-steatosis drug, anti-inflammatory? Or do you expect to see perhaps a direct anti-fibrotic activity? Just trying to gauge your understanding at the moment as how do you see the effect directly in NASH?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [30]

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Yes. Thanks for dialing in and really appreciate your kind comments, I appreciate that. And I think as Paresh said, we obviously want to generate full clinical data within NASH. But I think if we step back and I think we'd like share with you what we have and what are some of the facts, right? So when you look at NASH and the parameters that we've talked about, cholesterol, IBAT inhibitors were originally developed as cholesterol-lowering agents. We have some promising data in the clinic with elobixibat that shows an improvement in cholesterol level. NASH is associated with issues in glucose transport, right? Again with elobixibat, we have some promising data that looks at GLP-1, right? So we're encouraged by that. NASH is associated with liver inflammation and liver fibrosis. Here preclinically with A4250, we have some interesting data from that perspective. And we've taken A4250 into the STAM mouse model and shown some interesting effects on NASH score, right? And then the last thing, as Paresh had mentioned, in the recent publication, it looks at the levels of bile acids in patients with NASH, interested if we can control the NAFLD in patients with NASH, that seems to increase. So that's the facts that we have in front of us. That brings us what we believe into a good hypothesis, that our mechanism could be exciting and interesting in NASH, and we need to go forward and generate that data in the clinic and that's our plan.

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Antonio Eduardo Arce, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Biotechnology Analyst [31]

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Okay, great. That's helpful. The only other question I had was around the planned initiation of your Phase II. You mentioned obviously the method of use patent that's pending. And I know -- I recognized as you've said already before that it's still early that you're still working through different aspects of potential design with KOLs and others. But just wondering if there was anything else aside the pending patent, other things that you're working on that's sort of a gaining factor to start that trial?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [32]

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Yes. Thanks, Ed. So I think our planning is at full speed ahead, right? So Paresh and the team are interacting with key opinion leaders. We've retained advisers in terms of trial design, so we are up and going and trying to figure this out. We anticipate during that time frame, we will receive -- and we're hopeful of receiving the method of use patent in NASH, it's involved in, and we're fairly confident that that's going to occur. So as that occurs and as we have a better line of sight as to what our development plan would be then we should be able to execute on our planned Phase II trial. So there's nothing else that's gating. And as you are aware from a financial resourcing perspective, we're in good shape as well to be able to pay for the trial.

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Operator [33]

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Our next question comes from the line of Patrick Dolezal with LifeSci Capital.

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Patrick Edward Dolezal, LifeSci Capital, LLC, Research Division - Associate [34]

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I do have a couple on 4250 and the Phase III program. So to start, I was just curious if you can provide a bit more granularity on which pruritus measurement you'll be using for the FDA endpoint? And then if you could just briefly compare that with some of the prior pruritus measurements that we've seen in the Phase II?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [35]

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All right. Thanks for the question, Patrick. As you know, this is an area that we've spent a lot of time to try and make sure that we get it right. Paresh, may be you want to talk a little bit about that?

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Paresh N. Soni, Albireo Pharma, Inc. - Chief Medical Officer [36]

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Yes. Thanks, Ron. So as Ron mentioned, we've been working on this pruritus tool for quite a while now, since we decided to study A4250 and PFIC. And we've developed a propriety tool with closed guidance and working closely with the FDA and input from the EMA. We've appointed a very established and a very experienced vendor to work -- who works on [pro tool.] So it's a proprietary tool that we have designed, which -- and we will be disclosing some of those later this year hopefully if abstracts are accepted, and it shows the different scales of -- in terms of the Phase II study, we used 3 pruritus scales. They were off-the-shelf scales used in adult and children studies. But we use that as a basis to look at which question -- works best with the families and the patient and develop the tool out of those existing scales and develop a novel proprietary scale, which we'll be using in the study. And we've tested that with the patients and the caregivers. And they are very comfortable filling it and they can -- they understand it. It's very simple and easy to use, and we hope to disclose more at an upcoming scientific meeting on that scale.

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [37]

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Yes. Thank you, Paresh. I think Patrick, just to summarize the way to think about this in Phase II, we showed tremendous impact on pruritus using general relatively blunt tool, right? The FDA insists on a proprietary tool for Phase III. As Paresh has said, we've taken the best of that, tested that in kids and with their caregivers. And I think we're pretty excited that we have a tool that will be effective in our Phase III. And as Paresh said, we're hopeful that we'll be able to share more of those details with you as the year kind of rolls through. Thanks for the question.

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Patrick Edward Dolezal, LifeSci Capital, LLC, Research Division - Associate [38]

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Great. And then I have a similar one for the EMA endpoint of serum bile acid responder rate. Just kind of curious, again, if you could provide any details on how exactly this metric will be defined? And then, obviously, we've seen it on the bile acid reduction, so just kind of how that compares to the responder rate?

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [39]

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Yes. Thanks for that question as well. I think when we think about the Phase III design overall, we're pretty excited about what we've been able to agree to with both the FDA and the EMA. The nice thing about the Phase III design is a lot of the elements that we've done in Phase II we'll study again in Phase III, but almost in a more refined state both to your question in pruritus and I think for serum bile acids. So just to remind everybody that the primary endpoint for the EMA is a measure of serum bile acid responder of the difference in response between the treated group and the placebo group. If you look at sort of the natural history of the disease, our expectation in the placebo group, it's hard to see patients getting a decrease in bile acids during that time frame, but we've sort of accounted for any sort of variability. The definition of the -- of a response is 2 per -- is either or. So either a 70% reduction in serum bile acids or reaching a level of serum bile acids between 50% and below 100%, so one of those 2. And if we go back to our Phase II data, the majority of patients would have met that definition.

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Operator [40]

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Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Cooper for any closing remarks.

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Ronald H. W. Cooper, Albireo Pharma, Inc. - CEO, President and Director [41]

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Well, thank you, operator. I think we've had a great start to 2018 at Albireo. We're excited about starting our Phase III trial with A4250 and executing on the rest of the plan. And we want to thank everybody for their interest and for dialing in today.

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Operator [42]

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Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.