The Success Of Intercept Pharmaceuticals Is A Negative For Cumberland Pharmaceuticals

Intercept Pharmaceuticals (NASDAQ:ICPT) is the story of the day, up a massive 218% to $230.68 from yesterday's $72.39 close. This massive move comes on the heels positive results in trials for the use of obeticholic acid (OCA) for the treatment of nonalcoholic steatohepatitis.

These news are at least partially negative for Cumberland Pharmaceuticals (NASDAQ:CPIX), a stock I had pegged as an interesting long-shot on the prospects of its Hepatoren drug candidate that's in Phase II trials.

The reasoning is as follows:

  • With ICPT's obeticholic acid (OCA) being successful and on its way to approval, a greater number of medical conditions which could evolve towards cirrhosis will be treated sooner. This promises to lower the overall cirrhosis incidence.
  • At the same time, Hepatoren is supposed to fight Hepatorenal syndrome, which is a "a complication of end-stage liver disease which occurs in patients who have chronic liver dysfunction with cirrhosis and ascites".
  • Hence, while Hepatoren is not a direct competitor to obeticholic acid (OCA), it does stand the chance that its end-market will see a significant reduction due to obeticholic acid (OCA)'s effectiveness.

The one mitigating factor is that obeticholic acid (OCA) is being studied to handle nonalcoholic steatohepatitis, whereas in developed countries alcoholic consumption is still identified as being the leading cause of liver cirrhosis (Source: "Comparative Quantification of Health Risks: Sexual and reproductive health").

Conclusion

While not a definite blow, the success of ICPT's obeticholic acid (OCA) is a net negative for Cumberland Pharmaceuticals, in the sense that it should reduce the end-market for Hepatoren, should Hepatoren prove itself to be a useful medication.

Given that CPIX is a "long-shot" to begin with, given that Hepatoren is still only undergoing Phase II trials, this is enough to make me be neutral on it until better data on Hepatoren's prospects is available.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.