Shares of Intercept Pharmaceuticals (NASDAQ:ICPT), a small-cap biotech company with a focus on discovering medicines to treat non-viral, progressive liver diseases, lost roughly half of its value in September, according to S&P Global Market Intelligence. The catalyst? Look no further than concerns surrounding its only approved drug, and leading clinical candidate, Ocaliva.
For Intercept, the issues began on Sept. 12, when it advised physicians to be extra cautious when dosing Ocaliva to patients with primary biliary cholangitis (PBC), the only approved indication for Ocaliva. At the time, it was noted that 10 patients with liver impairments had suffered liver failure, injury, decompensation, or death as a result of overdosing. Patients with liver impairment are only designed to receive the drug once weekly in a 5 mg dose, but some had been dosed daily.
The wheels fell of the wagon, though, on Sept. 21, when it was disclosed by the Food and Drug Administration (FDA) that 19 patients with PBC had died while taking the drug, some of which had done so while being administered excessive doses. Following multiple price target and rating downgrades from Wall Street, the possibility now is that the FDA could alter the marketing label for Ocaliva and issue a black box warning on the drug. A black box warning is about as harsh as it comes for a drug approved by the FDA, and it has the potential to adversely impact sales of Ocaliva as a treatment for PBC.
The deaths are also a concern for Intercept's phase 3 Regnerate trial, which is testing Ocaliva as a treatment for non-alcoholic steatohepatitis (NASH). NASH is a disease that 2% to 5% of all U.S. adults will suffer from, and there currently is no cure. If approved to treat NASH, it could have a multi-billion dollar opportunity. But there are clear concerns about the safety of treating patients with Ocaliva following these 19 deaths.
Though there is a perfectly good reason for Wall Street to worry about future PBC sales, I believe they're overlooking two key catalysts.
First, while not every attributable death in PBC was due to overdosing, a majority were. The takeaway here being that if physicians and patients were to closely follow the dosing schedule, there would be a reduction in the number of deaths attributed to the drug. Not to mention that PBC is a deadly disease, and a number of the patients that died were already extremely sick. In other words, Ocaliva isn't nearly as responsible for these patient deaths as the FDA's report would suggest.
The second factor that Wall Street seems to have overlooked is the lack of meaningful safety concerns in the phase 2 Flint study in NASH -- the study that really put Intercept's lead drug on the map. Just as cancer drugs can work wonders with one cancer type and fail miserably in other types, Ocaliva probably offers a different set of safety concerns for PBC and NASH patients. In the Flint study, severe or life-threatening adverse events were similar to that of the placebo. Since this is where the big money lies for Intercept, the downward move in its share price is likely an overreaction.
This writer aggressively acquired shares of Intercept in late September and would certainly encourage investors with a long time frame and high risk tolerance to take a closer look at this stock.