Intercept Pharmaceuticals (NASDAQ: ICPT) is a biotech company whose only drug treats liver diseases. Founded in 2002, Intercept's drug, obeticholic acid, was approved by the U.S. Food and Drug Administration (FDA) in 2016 for treating primary biliary cholangitis. However, the company has seen difficulty in expanding that approval to treating nonalcoholic steatohepatitis (also known as NASH). In fact, in June 2020, instead of approval, the U.S. Food and Drug Administration requested more safety and efficacy data on the drug. Naturally, considering how NASH affects millions of people and Intercept has been running a NASH phase 3 trial since 2015, Intercept initially thought it had enough evidence for approval.
Nevertheless, as a result of the negative news, the stock price plummeted from $77 to $47 and is trading at $21 as of April 21. With clarified clinical trial results coming out in June, there is ample reason for investors to worry.
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Missing the mark
Intercept is currently running four clinical trials with obeticholic acid, two of which, named Regenerate and Reverse, are in phase 3. While Regenerate examined NASH patients in general, Reverse examined only those NASH patients with compensated cirrhosis (those who may have NASH without yet exhibiting symptoms, making diagnosis trickier to perform).
In both phase 3 trials, one major trend in safety profiles emerged -- as the dose increased from 10 mg to 25 mg, the risk of major side effects increased as well. While 25 mg was deemed more efficacious, this dosage also increased the risk of excessive itching and LDL cholesterol levels. In Regenerate, while 28% of those treated with 10 mg experienced excessive itching, 51% of those treated with 25 mg experienced excessive itching. In addition, a peak LDL increase of 22.6 mg/dL was observed four weeks after starting treatment; such an increase can significantly increase cardiac risk.
Data from one of Intercept's phase 2 trials of obeticholic acid, known as Control, suggested that atorvastatin 10 mg, a drug that can be used to lower bad cholesterol, should be given with obeticholic acid to decrease cardiac risk stemming from high LDL cholesterol levels. Without such implementations in phase 3, Intercept could have a difficult time convincing the FDA to approve obeticholic acid for NASH.
When the drug is used to treat primary biliary cholangitis, the doses are lower -- 5 mg to 10 mg, with frequency varying from daily to twice weekly depending on liver function. But higher doses will be necessary for treating NASH, and without a better safety profile at those higher doses, obeticholic acid could face an uphill battle for label expansion.
A rough path ahead
If bad news arrives , Intercept's successes with primary biliary cholangitis might not transfer over to NASH. So far, Intercept has made $234 million in net sales in the U.S. alone in 2020. With a market cap of $714 million, much is at stake for Intercept's ventures in treating NASH. The company saw $312 million in annual revenue in 2020 and had $477 million in cash and equivalents on the books as of December; that money may come in handy if Intercept needs to conduct more trials. Given that the company's annual total operating expenses had reached $543 million as of December, if Intercept wants to be able to satisfactorily complete its phase 3 trials, management may have to cut costs significantly. Healthcare investors would be better served looking for better opportunities elsewhere.
