Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Intercept Pharmaceuticals (NASDAQ:ICPT) soared by 16% today after the company announced that the FDA had awarded its clinical stage drug obeticholic acid breakthrough therapy designation as a treatment for nonalcoholic steatohepatitis, or NASH.

So What: NASH is a common liver disease that features a high level of fat in the liver, inflammation, and liver damage. NASH can cause liver cirrhosis or permanent liver damage that could require liver transplant in up to 10% of NASH patients.

The National Institutes of Health estimate that NASH affects between 2% and 5% of the American population and that it is one of the major causes of liver transplant behind hepatitis C and alcoholism. Unfortunately, the number of diagnosed cases of NASH is increasing, perhaps as a result of a doubling in adult obesity rates over the past 10 years. As a result, there's a significant need for new NASH treatment options.

Now what: Breakthrough designation means that Intercept can work more closely with the FDA on trial design and a future FDA application for approval. It also provides Intercept with the potential for a rolling review of its application prior to final phase 3 data results becoming available, as well as priority review. Overall, the awarding of breakthrough status could mean that Intercept is able to commercialize OCA more quickly than it would be able to otherwise.

The company is currently designing its phase 3 trial of OCA for NASH, but its phase 2b trial was halted early (a good sign) when independent regulators determined that OCA significantly decreased an important activity score by at least two points, without patients' scarring worsening compared to placebo. 

Given those mid stage trial results and the fact that breakthrough designation may mean that Intercept has an opportunity to usher OCA more quickly to market, investors should watch this company's progress closely. After all, the market for hepatitis C treatment, which also affects the liver, is worth billions of dollars annually (and growing), and that suggests that the market opportunity for NASH could prove to be similar.