If late stage trial data is as strong as the data just reported, liver disease may someday face a new foe thanks to Intercept Pharmaceuticals (NASDAQ: ICPT )
Intercept's orphan drug obeticholic acid, or OCA, targets a range of liver disease including primary biliary cirrhosis, portal hypertension, and NASH. But it was news regarding its Phase 2b trial for NASH that likely has liver disease drug companies like Gilead (NASDAQ: GILD ) and Johnson and Johnson (NYSE: JNJ ) paying attention.
It doesn't happen often, but when it does people take heed
The company's trial studying OCA in NASH, an increasingly common cause of liver failure, was halted early by its independent watchdogs after it was determined the study had already met its endpoint. The study was evaluating a 25 mg oral dose of OCA for both safety and efficacy in NASH patients over 72 weeks.
The decision came after the study's monitoring board reviewed liver biopsy data in half the 283 patients in the trial. That review showed a highly statistically significant improvement in decreasing an important activity score by at least two points, without scarring worsening compared to placebo.
"The unexpected early stopping of FLINT due to OCA meeting the primary endpoint with such high significance is a major milestone," said Mark Pruzanski, M.D., Chief Executive Officer of Intercept. "NASH has grown to epidemic proportions worldwide, having become a leading cause of cirrhosis and liver failure."
An unmet need with no approved therapies.
Investors may be viewing OCA's impact on Intercept in the same light they viewed next generation hepatitis C drugs from Gilead and Johnson & Johnson. Gilead received FDA approval for its hepatitis C drug Sovaldi in December and Johnson & Johnson won FDA approval for its Olysio in November. The growing global need for new hepatitis C treatments has industry watchers thinking those drugs may have billion dollar potential.
Like hepatits C, the global need for new treatment is significant. Both diseases affect millions and each can cause liver failure. But unlike hepatitis C, which is caused by virus, NASH is characterized by a buildup of excessive levels of fat in the liver, causing chronic inflammation that increases scarring, which may lead to liver failure in as many as 10% of NASH patients.
Driving the increase in diagnosed patients is an increasingly fat and sugar-rich diet. Estimates suggest as many as 12% of Americans have NASH, and roughly 6 million of them have advanced scarring or liver failure. Based on disease's rising prevalence, Intercept projects the disease may become the leading reason behind liver transplant, accounting for more cases than either hepatitis C or alcoholism.
That market opportunity has investors cheering since Intercept controls the commercial rights in every country except Japan and China. Dainippon Sumitomo agreed to pay Intercept up to $315 million plus royalties for those rights in 2011.
The halt also adds support for OCA's use in other indications, including primary biliary cirrhosis, or PBC, and type 2 diabetics with nonalcoholic fatty liver disease.
On the heels of positive phase 2 results as a therapy for PBC, Intercept launched a phase 3 trial for the condition, which primarily affects women over 40 years old. There may be as many as 450,000 cases of PBC may in China and Japan alone and PBC is the fifth largest reason for liver transplant in the United States.
Advancing other drugs into trials
OCA is clearly the most advanced drug in Intercept's pipeline and the PBC indication may be the closest to getting commercialized, but Intercept also has a couple other interesting drugs in early stage studies.
Similar to OCA, the company's NT-767 is an agonist derived from the primary human bile acid CDCA that targets receptors used by the body to regulate metabolism. The company thinks NT-767 could be up to five times more potent than OCA in stimulating the same receptors targeted by OCA. According to the company, NT-767 showed greater anti-scarring and anti-inflammatory results than OCA during animal studies.
Intercept is also developing INT-777, another agonist derived from the primary human bile acids. The company has completed its IND filing for INT-777, a drug that targets a receptor shown to directly regulate glucagon release, or GLP-1. GLP-1 has become a big focus for the major diabetes drug makers and Intercept believes INT-777 has an advantage over them thanks to its ability to induce production. If they're right, the market potential could be large.
Diabetes giant Novo Nordisk's (NYSE: NVO ) GLP-1 drug Victoza had over $520 million in sales during the third quarter. That blockbuster status has Sanofi (NYSE: SNY ) , the maker of diabetes blockbuster drug Lantus, ushering its GLP-1 contender Lyxumia through trials. Sanofi announced its awaiting additional phase 3 data for the drug, which is already being sold in Europe, prior to filing for FDA approval. And Lilly is hoping its GLP-1 drug, dulaglutide, which is in phase 3 trials, can strengthen its diabetes franchise, which already includes blockbuster Humalog.
Fool-worthy final thoughts
One of the biggest challenges facing many emerging biotechs is the lack of commercialized products to fund development. The cost of conducting trials is higher than ever and investors need to pay close attention to biotechs cash burn rates to make sure they're liquid enough to see their drugs through clinic.
In the case of Intercept, it appears the company is well funded. The agreement with Dainippon provides some opportunity to monetize and a dilutive 2 million share offering allowed the company to exit September with $156 million in cash, up from $110 million in December 2012.
Intercept posted $55 million in losses during the first nine months of the year as R&D expenses associated with OCA jumped to $18.4 million from $11.4 millionlast year. That rate and projections for other trials has Intercept confident its funds can see it through early 2016.
That cash on hand, and the potential market opportunity for OCA in both PBC and NASH makes Intercept an intriguing company with a sky high market cap of $5 billion and no revenue. Whether that valuation is too high remains to be seen and depends on more clinical data and, ultimately, the nod from the FDA.
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