Shares of Intercept Pharmaceuticals have sunk nearly 30% in value since Tuesday, when the company announced its drug Ocaliva scored the first ever positive Phase 3 result in a liver disease known as NASH.
While such data would typically lift a drugmaker's stock price, Intercept's downward slide reflects both caveats surrounding the trial outcome as well as a realization that first-to-market might not mean commercial success in the closely watched therapeutic area.
Some estimates hold that up to 30 million people in the U.S. have NASH, representing a market potentially worth billions of dollars for drugmakers. With no currently marketed therapies, manufacturers are in a heated race to secure a Food and Drug Administration approval in NASH.
Leading the pack thus far is Intercept with Ocaliva, or obeticholic acid. The drug is already cleared in the U.S. to treat another liver disease called primary biliary cholangitis, but an approval in NASH would represent a much larger opportunity.
Initial results from the late-stage REGENERATE study showed 23% of patients given a high dose of the drug experienced one stage or greater improvement in fibrosis without their NASH getting worse. In the placebo group, a significantly lower 12% of patients experienced such outcomes.
Intercept said it plans to file Ocaliva for a NASH indication in the U.S. and Europe during the second half of 2019. That update, combined with the positive readout, lifted the company's shares to nearly $132 apiece on Feb. 19, close to their 52-week high. The excitement appeared to wane, however, as investors and analysts began to further examine the data.
SVB Leerink, for instance, had a rating of "Market Perform" for Intercept on Feb. 19 when the REGENERATE results debuted. On Feb. 21, another team at the investment bank initiated an "Underperform" rating, in part because of Ocaliva's side effects.
Pruritus, or itching, was observed in more than half of the study participants taking the high dose of Ocaliva compared to less than one-fifth of those on placebo. Wall Street has been focused on adverse events associated with NASH drugs because the disease is largely asymptomatic until later stages. If a drug carries too many side effects, the thinking is that patients may discontinue treatment, which could in turn crimp sales.
"Despite successes, [Ocaliva] has challenges and remains a hard pill to swallow, with pruritus, add-on lipid control and a marginal efficacy," Pasha Sarraf of SVB Leerink wrote in a Feb. 21 note.
"Intercept will have to manage a pricing quandary without destroying value in their PBC and NASH markets," Sarraf added. "FDA is likely to give the drug a pass as the lead molecule for the brand new Liver division; however, physicians, payers and patients may ask for more."
RBC Capital Markets' Brian Abrahams had a similar takeaway. While the results were a "net positive," Intercept could face a slower commercial uptake due to Ocaliva's moderate efficacy and itching effects, as well as the challenge of potentially becoming the first company to attempt to build a market in NASH.
Headwinds aside, analysts still foresee a place for Ocaliva in NASH. Michael Yee of Jefferies emphasized the drug's efficacy in improving fibrosis, REGENERATE's co-primary endpoint and a measure that physicians and payers appear to care about most for these patients.
Gail Cawkwell, Intercept's senior vice president of medical affairs, safety & pharmacovigilance, told BioPharma Dive in mid-February that conversations with hepatologists have indicated they're interested in therapies both for fibrosis and for patients with less liver damage.
"Clearly, trying to prevent cirrhosis and those more symptomatic conditions, more severe health outcomes that come from cirrhosis is very important to them," she said.
There's also an argument made from both industry and Wall Street that there will be several waves of NASH treatments, given just how many patients there are and how the severity of their fibrosis varies so widely.
Executives from Gilead Sciences, Allergan and GenFit — three more leading developers in the NASH space — all said during the J.P. Morgan Healthcare Conference in January that they expect multiple therapies will be needed to adequately address different degrees of disease severity.