Intercept shares plummet on FDA warning
- The Food and Drug Administration has followed up Intercept Pharmaceuticals' "Dear Health Care Provider" letter with a drug safety communication concerning Intercept's Ocaliva, used to treat primary biliary cholangitis (PBC). This alert warns of increased risk of serious liver injury and death in patients with moderate to severe decreases in liver function who are given higher frequency doses than in the drug label. It also mentions cases of liver injury in patients with mild liver disease.
- There have been 19 deaths; seven of these were in moderate or severe PBC patients with decreased liver function receiving 5 mg daily rather than the recommended 10 mg twice weekly. There were also 11 cases of serious liver injuries.
- Much like previous sentiments, analysts continue to believe that the reaction from the market to these developments are overdone. An investor note from Jefferies sees this as simply reiterating what is already known, stating that the current stock reaction is "overblown."
The "Dear Health Care Provider" letter issued by Intercept Pharmaceuticals on Sept. 8 dropped the company's shares by 36%. After some recovery, today's FDA warning has knocked the shares down by almost 25%, closing at $73.70 – just 20 cents off its 52-week low.
However, analysts have seen this as an overreaction to guidance that is actually just pointing out what healthcare providers should already know and that is stated on the label – that the drug should be dosed at a lower level and less frequently in patients with moderate and severe hepatic impairment and monitored closely.
Michael Yee of Jefferies describes this as "largely old news and already known," linking the deaths with the higher dosing, and seeing the cases of liver injury as not unexpected in PBC, a serious disease.
"We continue to believe that the risk/benefit of Ocaliva clearly favors its use in PBC patients that have a lack of alternative treatment options," Yee said in the note to clients.
Ocaliva, which has orphan drug designation, was granted accelerated approval in May 2016 for the treatment of PBC. This is a rare liver disease that hasn't had a new therapeutic approved in a couple of decades. What is likely to be more significant for the company is the drug's potential in non-alcoholic steatohepatitis (NASH). A Phase 3 trial is under way in NASH – a much larger population – and a readout is expected in early 2019.
Yee also believes that the adverse events in PBC should not have an impact on the NASH clinical trial or the planned Phase 3 trial in cirrhosis. "We continue to believe the stock will recover as the Street comes to understand this and realizes that Intercept is trading at a level which ascribes no value to the $4-5 billion opportunity in NASH."
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