A Brief Look at Intercept Pharmaceuticals

Today, I decided to take another look at Intercept’s farnesosoid X-receptor agonist, Ocaliva. If you are unfamiliar with the term FXR-Agonist, I suggest you catch up by reading this article that illustrates the potential of farnesoid x-receptor agonists for therapeutic use.  A quick summary of the article:

• FXR activation has an effect on liver growth and regeneration
• “FXR activation has been shown to prevent and resolve liver fibrosis in rodents.“
• “FXR has been shown to be important in preventing gallstone formation in susceptible mice.”
• “FXRs play a key role in the pathogenesis of HCC, and that FXR activation could prevent or treat HCC.”
• “Preclinical studies have shown that FXR activation improves insulin sensitivity.”
• “FXR activation lowers plasma glucose, free fatty acids, triglycerides, and total cholesterol.”

These statements and/or conclusions of studies all sound promising for Ocaliva, but the conclusions must also be reached in human clinical trials. Intercept Pharmaceuticals is the current front runner of the NASH space and is dominating the PBC space with its recently approved product, Ocaliva. Intercept has completed a number of studies using Ocaliva for conditions in bile acid malabsorption, non-alcoholic fatty liver disease (NAFLD - NASH), bariatric and gallstone disease, primary biliary cirrhosis (AKA primary biliary cholangitis - PBC), hepatic impairment, and  type 2 diabetes. Intercept’s human data has shown promising results, but has also raised a number of questions about efficacy and safety. Here’s what we know Ocaliva can do in humans so far:

• Ocaliva increases insulin sensitivity by ~28% from baseline in a group treated with 25 mg and 20.1% in a group treated with 50 mg. In combined groups that equals ~24.5%, whereas the placebo group dropped by ~5.5%. Both patient groups saw weight loss when compared to placebo. Markers of liver fibrosis saw a marked decrease in the 25mg treated group. Modest, but significant changes in LDL-C were seen in both treatment groups.

• Ocaliva did better than placebo in treating PBC. Levels of ALP dropped greater than placebo (21-35% vs. 3%). 68.68% of patients showed an ALP reduction of 20% or more vs. 8.10% of placebo. “The incidence of pruritus in the OCA 10-mg, 25-mg, and 50-mg groups were 47% (not significant), 85% (  P  < .0003), and 80% (  P  < .006) vs 50% in the placebo … Severe pruritus was reported in 16% (6 of 38) of the patients in the 10-mg group, 24% (9 of 37) of the patients in the 25-mg group, and 37% (15 of 41) of the patients in the 50-mg group of patients, respectively.”

• Patients with bile acid diarrhea experience improvements in median stool frequency. This makes sense because in other trials Ocaliva had a higher prevalence of constipation. Common adverse event was a headache.

• Ocaliva reduces liver stiffness as measured by a non-invasive measure (fibroscan).

• 45% of patients in an Ocaliva treated group who were meantto have biopsies at baseline and 72 weeks had improved liver histology comparedto 21% of patients in the placebo group. 23% of patients in the Ocaliva treatedgroup developed pruritus compared with 6% in the placebo group. Serumcholesterol concentrations increased more in the Ocaliva-treated patients thanin the placebo-treated patients. “Becauseof concerns about persisting changes in cholesterol concentrations in patientsreceiving obeticholic acid, the DSMB also recommended discontinuing treatment,but continuing the study to the final 24-week post-treatment assessment and thepatients were managed accordingly.”

• Top-line results of NASH study expected sometime in 2017.

Of course, these results are promising for Intercept and its investors. Ocaliva is currently approved for treatment of PBC in both the United States and Europe.  Many believe that Ocaliva will dominate the PBC market, which may be true – at least initially. Many also believe that Ocaliva will be the market leader in treating NASH. But I have my doubts that the latter will ever happen. This is because of the cost of the drug to the end user. A call to a specialty CVS pharmacy showed that both the 5 mg and 10 mg dose costs the end user $199.24 per dose (assuming that the end user doesn’t have insurance). That amounts to an annual price tag of $72,722.60 for the uninsured. However, the cost is drastically reduced when the end user has insurance (cost varies by insurance coverage). Usually I wouldn’t be too concerned about the price tag, but in this case the competition plans to charge ~4-10 times less the cost of Ocaliva. That should concern some investors. The long-term implications are not great. Especially for a market that will have very stiff competition as soon as new entrants get past their phase II trials.

Now that I have properly admonished Intercept and its Ocaliva pricing model, I would like to point out to readers that Intercept has a program that helps all patients afford Ocaliva treatment. With that being said, I still have doubts that Ocaliva will be highly accepted by care providers. Intercept’s 2016 earnings call will help us (investors) gauge how care providers view Ocaliva as a therapy option. We aren’t expecting ground breaking sales because PBC has a very small patient population. However, if sales fall far below estimates, it may signal that Ocaliva is either overpriced and/or not being accepted by the medical community or insurance companies. Poor sales could also signify that Intercept has invested poorly in its sales network (highly doubtful of this). Credit Suisse believes that Intercept will only pull in $7M in sales for 4Q-2016; I believe it might fall below that metric. Whatever the case, Intercept AND its product Ocaliva still have a lot of potential. Intercept has a substantial amount of cash that it can use to either repurchase shares, reinvest in the Ocaliva supply chain, and/or acquire and test other NASH products. Ocaliva is efficacious for both PBC and NASH, but it does have its drawbacks (pruritus, constipation, and headaches), which drew concerns from a number of potential investors who were itching for strong returns with minimal downside risk. Does Intercept’s stock have room to grow? Absolutely. Intercept has a drug that is generating revenue in both the US and European markets. Its stock is down 36% since 3Q-2016 and has enough capital on hand to quickly pivot should the need arise. An acquisition is possible in the near-term, but I suspect that Intercept will attempt to build a strong foundation for its NASH pipeline before an acquisition occurs.