What: Shares of Intercept Pharmaceuticals (NASDAQ:ICPT), a clinical-stage biopharmaceutical company focused on developing novel drugs to treat chronic liver and intestinal diseases, exploded higher by 27% in March, according to data from S&P Capital IQ, after reporting additional data from its midstage FLINT study and following the failure of a competing drug in a midstage study.
So what: In chronological order, on March 20, Intercept announced fresh data from its FLINT trial during its poster session at the American Association for the Study of Liver Disease meeting. The FLINT trial is studying obeticholic acid, or OCA, as a treatment for nonalcoholic steatohepatitis, or NASH, a chronic and potentially deadly liver disease that affects millions in the United States.
According to the data release, of the high-risk NASH patients tested, 18% experienced improvement in NASH resolution, 60% of OCA-treated patients experienced a minimum two point improvement in the NAFLD activity score, and 39% experienced an improvement in liver fibrosis by at least one stage. By comparison, the placebo led to a 5% improvement in NASH resolution, 30% improvement in NAFLD activity score by at least two points, and just 21% of patients with at least one stage improvement in liver fibrosis. OCA-treated patients also demonstrated fewer instances of fibrosis progression (17% vs. 29% for the control group). Finally, OCA treated patients did not demonstrate a significantly higher cardiovascular risk than the control group.
On top of these outstanding results, competitor Genfit revealed underwhelming trial results on March 26 for GFT505 as a treatment for NASH, with the drug failing to meet its primary endpoint. However, despite missing its primary endpoint, Genfit is moving forward with a larger late-stage trial for GFT505. Genfit's failure implies that Intercept could wind up with an even larger share of the NASH market.
Now what: What investors need to ask themselves here is whether or not the FLINT data, and the failure of Genfit's GFT505 in a smaller study, merits a 27%, or better than $1 billion, increase in Intercept's share price in March.
My personal opinion is that it does, as long as you're a risk-taking investor.
Intercept has a lot riding on the success of OCA in NASH, because without any products currently approved, a $6 billion-plus valuation is a tough pill to swallow for even the most risk-tolerant investors. Intercept is going to need the support of the Food and Drug Administration, as well as a perfect drug launch (assuming it is eventually approved) in order to maintain its current valuation. It's also going to need the patience of emotional traders, who may have to endure another two-to-three years of hefty losses before Intercept turns a profit.
However, if other NASH drug candidates continue to flop in clinical studies, Intercept could see its value climb even further. Of course, we shouldn't rule out Gilead Sciences, either, which just acquired a pipeline full of experimental liver disease drugs, including NASH. If any company can give Intercept a run for its money, it might be Gilead. Still, Gilead is years behind Intercept, clearing a path for OCA to be a first-in-class NASH product.
I'd approach Intercept with very cautious optimism at the moment. It's very pricey, but under the right scenario, and with the backing of OCA's trial data, its shares could head even higher.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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