Intercept Pharmaceuticals (ICPT -14.99%), a commercial-stage liver disease specialist, lost a staggering 22.7% of its value in April, according to data from S&P Global Market Intelligence. What caused investors to hit the exits last month?
Intercept's shares broke down in April for two reasons:
- The raging drug pricing debate in the United States weighed on nearly every biopharma stock last month. Not surprisingly, Intercept's shares proved to be no exception to this downward trend, given the rather hefty price tag for its Food and Drug Administration-approved primary biliary cholangitis drug, Ocaliva.
- The company's April update on Ocaliva's pivotal nonalcoholic steatohepatitis (NASH) trial at the International Liver Congress turned out to be a nonevent for the most part. Investors were hoping this update would lay out a stronger case for Ocaliva's label expansion into NASH and subsequent competitive positioning in this jam-packed space.
Ocaliva is on track to become the first-ever FDA-approved drug for NASH. While NASH is undeniably a multibillion-dollar commercial opportunity that could cause Intercept's top line to soar in the coming years, the drug's mixed late-stage results for this indication are likely to trigger an advisory committee meeting prior to a formal regulatory decision.
So, Ocaliva's first-mover advantage in NASH is far from a sure thing at this point. The drug's problematic side effect profile also opens the doors for rival NASH therapies from a competitive standpoint. In other words, Ocaliva may never turn out to be the megablockbuster the company and its shareholders originally envisioned.
Per the company's first-quarter update, Ocaliva's regulatory application should be in the hands of the FDA by the third quarter of this year. Intercept also plans to file for Ocaliva's NASH indication in the European Union by the fourth quarter of 2019. So, if everything goes according to plan, Intercept could start racking up NASH sales in the second half of 2020. That's an exciting proposition in light of NASH's monstrous commercial opportunity.
However, investors shouldn't underestimate the regulatory risk here. Ocaliva's late-stage NASH trial wasn't a smashing success by any stretch of the imagination, and there are a host of other drugs in development for this indication. The FDA, in turn, may simply decide to wait for a more compelling option for NASH.