In mid-January a little-known biotech Intercept Pharmaceuticals' (NASDAQ:ICPT) market capitalization leaped from $1.4 billion to $8.6 billion in a matter of days and the stock price touched briefly a high of $497.00.
The tiny, New York based Intercept has only 45 employees, no product to sell and has never made a profit. The jump in price drew a wide attention.
Since then the price fell back but at this writing it is still way above where it was at the beginning of the year ($68.00). Shares fell after a National of Institutes of Health report said that patients in the clinical trial experienced increased total cholesterol levels as opposed to those taking a placebo.
The cause of the excitement was that in the Flint clinical trial the company's drug, OCA (obeticholic acid) has met primary endpoints and the trial was stopped early for efficacy.
The 283-patient clinical trial was expected to be completed around the end of 2014, but the study was stopped after only half the patients had completed treatment and an analysis showed that results were strikingly in favor of the drug compared with placebo.
OCA is being developed by Intercept as a treatment for NASH or nonalcoholic fatty liver disease. The drug mimics the naturally occurring human bile acid which Intercept believes has liver-protective properties.
NASH: a big market
NAFLD (Non Alcoholic Fatty Liver Disease) is considered the most common form of chronic liver disease in adults in the U.S., Australia, Asia and Europe. In the U.S. the estimated prevalence of NAFLD is 20-30 percent of the adult population.
NASH is a progressing form of NAFLD, and it is associated with inflammation and scarring of the liver.
Although the exact cause of NASH is unknown, it is most frequently observed in people who
- Are obese: More than 70 percent of people with NASH are obese which means that they are 10 to 40 percent heavier than their ideal body weight.
- Up to 75 percent have type 2 diabetes.
- About 20 to 80 percent have hyperlipidemia (high blood triglyceride levels and/or high blood cholesterol levels).
- Frequently have insulin resistance, a state in which the body does not respond adequately to insulin.
There are currently no drugs approved for the treatment of NAFLD or NASH. It has been reported that in 2010, there were approximately $615 million in off-label sales of various therapeutics for the treatment of NASH, such as insulin sensitizers (e.g., metformin), antihyperlipidemic agents (e.g., gemfibrozil), pentoxifylline and ursodiol.
Lifestyle changes and exercise to reduce body weight and treatment of the diabetes and dyslipidemia are accepted as the standard of care but have not conclusively been shown to prevent disease progression.
Intercept CEO Mark Pruzanski told the J.P. Morgan Healthcare Conference in San Francisco that the number of NASH patients could be as high as 6 million adults in the U.S. NASH is also expected to become the leading cause of liver transplants. The NASH market for treatments could be bigger than hepatitis C.
Like hepatitis C, the global need for new treatment is significant. Both diseases affect millions and each can cause liver failure. But unlike hepatitis C, which is caused by a virus, NASH is caused by a buildup of excessive levels of fat in the liver, causing chronic inflammation that increases scarring, which may lead to liver failure in as many as 10 percent of NASH patients.
The driving force behind the rapid growth of the disease is an increasingly fat and sugar-rich diet.
The Phase 2b Flint study which was stopped early for efficacy, found that after 72 weeks of treatment with OCA, the symptoms of the NASH patients had improved at a statistical significant p value of under 0.0031, compared to patients on placebo.
Flint had 283 adult NASH patients enrolled at eight U.S. centers.
Patients were randomized to receive either a 25 mg dose of OCA or placebo for 72 weeks.
At the beginning and at the end of the 72-week treatment a biopsy was taken to record the NAFLD Activity Score.
The trial stoppage in January was based on the scheduled review of the liver biopsy data by the Data Safety Monitoring Board.
The analysis demonstrated that OCA treatment resulted in a highly statistically significant improvement in the primary histological endpoint, defined as a decrease in the NAFLD Activity Score of at least two points with no worsening of fibrosis, as compared to placebo.
By the time of the review approximately half of the 283 randomized patients completed the trial. Those patients who had not yet completed the trial and therefore did not have a second biopsy, were treated as non-responders in the analysis. The pre-defined threshold of statistical significance for stopping Flint was for the p value to come in below 0.0031.
NIDDK is going to present a full data set in the fourth quarter of 2014. NIDDK, the National Institute of Diabetes & Digestive & Kidney Diseases (NIDDK), a part of the National Institutes of Health is the sponsor of the Flint trial.
NIDDK has not provided any information concerning the magnitude of lipid effects but Intercept believes that the reported lipid changes in Flint patients on OCA will likely be similar to the results from a previous trial reported in 2009.
Other results from that earlier trial, like insulin sensitization, weight loss and liver enzyme improvements, together with the safety and tolerability profile of OCA, served as a basis for choosing OCA for the Flint trial in 2010.
Intercept also has a number of other trials going.
It completed the double-blind phase of its Phase 3 trial in PBC (Primary Biliary Cirrhosis) and according to the company, "a vast majority of the patients completing the 12 months have opted to cross over to the five year long term safety extension open-label phase of the trial."
The company obtained positive clinical data in all six Phase 2 clinical trials completed to date in five different indications. Further NASH trials of OCA are also being conducted by its partner Dainippon Sumitomo Pharma in Japan in 2014 with results expected by the end of 2015.
The jump in Intercept's share price helped former billionaire Francesco Micheli to score big. Micheli is the chairman of Italian biopharma investment company Genextra which owns about 30 percent of Intercept stock.
Micheli last appeared on the Forbes World Billionaires list in 2001.
Gilead: Pharma giant Gilead (NASDAQ:GILD) is developing its own drug for NASH. The Phase 2 trial investigates Simtuzumab (GS-6624), a monoclonal antibody in patients with compensated cirrhosis secondary to NASH.
700 mg of Simtuzumab is administered by infusion over 30 minutes every 2 weeks for 96 weeks. Another arm is testing 200 mg of the drug and a third arm is placebo. 225 patients are treated at 75 locations.
Conatus: San Diego based Conatus Pharmaceuticals (NASDAQ:CNAT) is developing an orphan drug, emricasan as a first-in class tablet designed to reduce the activity of enzymes that mediate inflammation and cell death. Conatus believes that by reducing the activity of these enzymes, emricasan has the potential to interrupt the progression of liver disease.
Genfit: Genfit SA, a French public company listed on Alternet in Paris, announced in November that all the patients were enrolled in the Phase 2 study of its compound, GFT505 that aims to treat NASH.
The company is testing 80 mg or 120 mg per day doses. Results of the 150 patients trial will be available at the end of 2014.
Galectin Therapeutics (GALT) had preclinical studies showing good results. The compound GR-MD-02 significantly improved NASH activity and reduced fibrosis including prevention of accumulation of collagen and/or reduced accumulated collagen in the liver. With no approved treatments for fatty liver disease with fibrosis, the results appear significant.
Intercept reported a loss of $55.4 million, or $3.15 per share, for the nine months ended September 30, 2013, compared to a net loss of $15.5 million, or $4.64 per share, for the nine months in the year before.
The increase in the loss was primarily due to the increase in the non-cash charges related to the periodic revaluation of warrant liability of $29.6 million, and caused by the increase in the company's share price.
Licensing revenue deriving from a contract with French private company Servier, decreased by $825,000 to $1.2 million for the nine months ended September 30, 2013, compared to $2.0 million for the prior year.
Research and development expenses increased to $18.4 million for the nine months ended September 30, 2013 from $11.4 million for the corresponding period of the prior year, primarily as a result of increased activities in Intercept's development program for its product candidate, OCA.
Loss for the third quarter was $31.7 million.
As of September 30, 2013, Intercept had cash and cash equivalents approximately $156.8 million, compared to $110.2 million at December 31, 2012.
Intercept believes that it will be able to fund its operations through early 2016. This includes the ongoing Poise trial for Primary Biliary Cirrhosis, and long-term safety extension of the Poise trial as well as other trials and the anticipated pre-commercial launch preparation expenses for OCA.
In June 2013, Intercept sold 1,989,500 shares of common stock at $33.01 per share in a public offering for net proceeds of $61.2 million, net of underwriting discounts and offering expenses.
The big jump in stock price made the little-known Intercept suddenly a household name among Wall Street analysts.
Citigroup raised its target to $600, stating that the liver disease treatment OCA could surpass a $5 billion sales level at some point. Oppenheimer has also raised its target to $360 while BofA/Merrill's target is set at a record $872.
Yet there are plenty of reasons for caution about this stock.
For one, given the fact that NASH is a slow-moving disease, there is uncertainty about the clinical endpoints in trials. Regulators may decide that long-terms trials are necessary which would push approval dates far out into the future.
The endpoint used in the Flint trial, the NAFLD activity score, was chosen by the NIH based on their previous experience, but it does not necessarily mean that the regulators also accept it.
The recruitment for a large trial could be a slow process. NASH is often a symptom-free disease, and sometimes resolves spontaneously. The use of a biopsy could also discourage potential candidates.
In spite of the negative possibilities, it may be concluded that:
- There is a real and massive need for treating liver disease
- A huge potential market is waiting for results
- Further positive trial results could solidify the company's position
- Positive trial results will make Intercept a tempting takeover target (which could also explain the recent jump in share price) but
- Sudden, drastic increases in a company's stock price are not desirable for any company because it invites the interest of short sellers and the jump can easily be reversed.
Unless, of course the company is backed by solid science and real market demand for results, which could possibly the case with Intercept, and which could mean a fast recovery from a price decline and the continuance of the upward trend.