Dive Brief:

• The Food and Drug Administration on Thursday said it would add a black box warning to the label of Intercept Pharmaceuticals Inc.'s chronic liver disease drug Ocaliva, cautioning against overdosing higher-risk patients and recommending closer monitoring.
• While black box warnings on new drugs typically scare off investors, shares in Intercept rose by more than 10% at market open — likely reflecting relief the FDA did not more broadly limit use of Ocaliva in patients with mild or moderate forms of the rare liver disease targeted by the drug.
• "This is good news and increases visibility and clarity for investors who were concerned that the FDA would have problems with the safety of the drug," wrote Jefferies analyst Michael Yee in a Feb. 1 note. 

Dive Insight:

Ocaliva (obeticholic acid) is Intercept's sole marketed product, winning approval in May 2016 for a rare type of chronic liver disease known as primary biliary cholangitis or PBC. Few other treatments exist for the progressive disease, which can lead to cirrhosis and liver failure. 

Approval of Ocaliva, and the drug's potential in other diseases like non-alcoholic steatohepatitis (NASH), fueled forecasts of blockbuster sales in the years ahead. 

Yet the drug's launch has been shadowed by concerns over the drug's safety. In September, the company issued a so-called "Dear Health Care Provider" letter warning of complications including liver failure and death when patients with moderate to severe PBC received higher-than-intended doses of Ocaliva.

The FDA followed that up with a drug safety communication outlining similar concerns. By the regulator's tally, nineteen patients receiving Ocaliva died over the 13 months from the drug's launch through last September. Seven out of the eight fatal cases with available information on cause of death showed the patients had incorrectly received daily doses, instead of the weekly administration recommended for those with moderate to severe declines in liver function.

In the new black box warning, the FDA highlights the heightened risk of liver decompensation or failure if patients are dosed incorrectly and recommended close monitoring of individuals with a prior decompensation event or scores indicating more severe disease. 

Importantly, the warning doesn't broadly ask healthcare providers to limit use of the drug in patients with mild disease, who make up most of Ocaliva's market. (Physicians are prompted, however, to more routinely monitor patients to watch for declining liver function or progressing cirrhosis.)

Jefferies estimates the PBC patients more directly affected by the warning make up less than 5% to 10% of the total population. Intercept puts that figure even lower, citing a range of 2% to 3%. 

As Ocaliva was approved on an accelerated basis, Intercept is required to complete post-marketing studies in patients with advanced PBC. Results are expected by 2023. 

Commercially, sales of the drug have grown steadily to total just over $40 million in the third quarter of 2017 (the most recent period with data available). Most forecasts of revenues bake in a future approval for the drug in NASH, a much bigger market.