Shares of Intercept Pharmaceuticals (NASDAQ: ICPT), a biopharmaceutical company focused on the development of therapies to treat diseases of the liver, collapsed and fell 46% in 2017, according to data from S&P Global Market Intelligence. The reason behind the miserable year relates to data released in September regarding its only Food and Drug Administration-approved drug, Ocaliva.
It all began on Sept. 12, when Intercept announced that 10 people with primary biliary cholangitis (PBC), the only approved indication for Ocaliva, had died while taking the medication. Then on Sept. 21, Wall Street and investors learned that the death toll tied to Ocaliva was actually 19 people, according to an FDA disclosure. Though there was an admission that some of these deaths were attributed to overdosing by physicians and/or patients, there was clear concern about the safety of Ocaliva over the long term.
As a reminder, Ocaliva is being studied as a treatment for primary sclerosing cholangitis (PSC) and nonalcoholic steatohepatitis (NASH). The latter indication impacts between 2% and 5% of U.S. adults and can lead to liver fibrosis, liver cancer, and even death. By the next decade, NASH is expected to be the leading cause of liver transplants. The concern with the PBC patient death data is that it might carry over to the NASH and PSC trials, significantly impacting Ocaliva's peak sales potential.
And, as icing on the cake, at the tail-end of the year Intercept announced that it was pushing back the announcement of its phase 3 Reverse study in NASH patients with compensated cirrhosis from the fourth quarter of 2017 to the first quarter of 2018. This delay is a reminder that Intercept's competition has yet another opportunity to beat it to market in an indication that has no FDA-approved therapies.
Though Intercept had a terrible year, I took the opportunity to aggressively buy shares following the September news for a handful of reasons.
Among those was the admission that physicians were prescribing, and PBC patients were taking, the incorrect dose of Ocaliva. Fixing this through physician and patient education is pretty simple and should alleviate unnecessary overdoses moving forward.
Even more importantly, investors should keep in mind that medicines tend to react differently to each disease. Many of the PBC patients that passed away while taking Ocaliva were already very sick. Comparatively, the adverse events profile in PSC and NASH were more or less on par with that of the placebo in clinical trials. In the all-important NASH studies, the only notable adverse events difference was an increase in pruritus (itching) in the Ocaliva arm, which is more a nuisance than a serious event. In other words, Ocaliva has demonstrated its safety in other clinical trials thus far.
Ocaliva also dazzled in the phase 2 Flint study, which is what put Intercept on the map. In that trial, the NAFLD Activity Score improved by at least two points with no worsening in fibrosis for 46% of Ocaliva patients compared to only 21% treated with the placebo. Similarly, 35% of Ocaliva patients demonstrated an improvement in fibrosis, along with 22% that had NASH resolution. Comparatively, 19% of the placebo group demonstrated fibrosis improvement, and just 13% had NASH resolution.
If Ocaliva's label is expanded into NASH and PSC, my belief is that Intercept could triple to quadruple in value from here. But make no mistake about it, a lot is riding on the company's phase 3 NASH trials (Regenerate and Reverse).
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