Please ensure Javascript is enabled for purposes of website accessibility

With Important Trial Results Due in June, Is This Drugmaker a Good Buy Now?

By Jia Jie Chen - Apr 23, 2021 at 9:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company faced challenges last year in expanding the label of its only drug. Will 2021 bring different results?

Founded in 2002, Intercept Pharmaceuticals (ICPT 7.22%) is a biotech company whose only drug treats liver diseases. Intercept's drug, obeticholic acid, was approved by the U.S. Food and Drug Administration (FDA) in 2016 for treating primary biliary cholangitis, a chronic disease that destroys bile ducts. 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 FDA requested more safety and efficacy data on the drug. NASH affects millions of people and Intercept has been running a NASH phase 3 trial since 2015, so management initially thought it had enough evidence for approval.

On the day of the negative news, the stock price plummeted from $77 to $47; it's currently trading at about $21. With clarified clinical trial results coming out in June, there is ample reason for investors to worry.

A person's gloved hands work with liquids in test tubes in a lab.

Image Source: Getty Images. 

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 heightened LDL cholesterol levels. In the Regenerate trial, 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 10 mg of atorvastatin, a generic 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 data confirming 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 the FDA does issue a rejection,  Intercept's successes with primary biliary cholangitis might not transfer over to NASH. So far in 2020, Intercept has made $234 million in net sales in the U.S. alone. With a market cap of $714 million, much is at stake for Intercept's ventures in treating NASH -- at its current trajectory, it may only have enough cash to last another couple of years. The company saw $312 million in annual revenue in 2020 and had $477 million in cash and equivalents on the books as of December. While that money may come in handy if Intercept needs to conduct more trials, given that the company's annual total operating expenses were $543 million as of December, satisfactory trial completion may also mean significant cost-cutting. Given all this, healthcare investors would be better served looking for better opportunities elsewhere.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intercept Pharmaceuticals Stock Quote
Intercept Pharmaceuticals
$15.15 (7.22%) $1.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.