Intercept Pharmaceuticals: Elucidating The Ramifications For The Flint Trial

Intercept (NASDAQ:ICPT), a developmental stage biopharmaceutical, is one of the most discussed stories in the first month of 2014. The underlying force that garnered attention toward Intercept was due to the early stoppage of the Flint Trial. The trial is investigating the roles of a semisynthetic bile acid, obeticholic Acid ("OCA"), in treating the deadly disease non-alcoholic steatohepatitis ("NASH") that we do not currently have any effective/safe treatment available. Among the stocks that I followed, ICPT is one the leaders with respect to its amplitude change in shares price. I believe that these volatile gyrations in shares price tend to create "mispriced" situations that could be capitalized by the enterprising investors for substantial gains.

Source: Finviz

In general, I am quite skeptical of stocks that recently appreciated in shares price like Intercept for they tend to recede in the following days. This price movement has much to do with the changing market's optimism versus pessimism rather than the underlying fundamentals inherent in the company. Due to the fickle nature of the market, neither Peter Lynch nor "Thay Quoc Thang", the Vietnamese Fortuneteller, could predict the market's mood with greater consistency and/or accuracy than the random results when flipping a coin. Hence, I am content to refrain from predicting when or where the PPS would gyrate. Conversely, I chose to focus my due diligence on analyzing the stocks' fundamental to find promising companies and to utilize the fruit of my research to build increasing stakes in promising companies like intercept. In the tradition of paying-it-forward to those who helped me early in my career, I would like to share my research to all readers.

Subsequent to my first research publication pertaining to Intercept Pharmaceuticals, I received a number of interesting comments/responses regarding the company. In responding to readers' requests, I am taking the venture to elucidate these intelligent responses and questions regarding Flint and the ramifications of Flint for OCA. I hope that this paper would achieve its intended purpose of helping not only investors but also for the approximately 6 million patients afflicted by NASH.

Currently, there is no safe/effective treatment for the NASH except the ultimate treatment, namely the liver transplant. Nevertheless, not many patients would qualify to receive the transplant. Moreover, the procedure itself is not free from various complications or adverse post-transplant effects. It is well known in the medical community that post-transplant drugs, working to suppress the patients' immune system to prevent the body from rejecting the transplanted organ, unfortunately create opportunistic opportunity for deadly infectious diseases to thrive. Instead of having the sole option of liver transplant, the interim results of the Flint trial is giving millions of patients afflicted with NASH hope … the hope to receive the gift of life.

Accordingly, Flint is the "Gold standard" clinical trial of 72 weeks duration that started in March 2011 to study the therapeutic roles of NASH in 283 patients. The National Institute of Diabetes and Kidney Diseases (NIDDK), a division of the National Institute of Health, is conducting the study in multiple-centers. The patients participating in Flint were randomized into the treatment group and the placebo group. The treatment group received 25 mg of obeticholic acid daily while the control group received sugar pills. Neither the patients nor the trial investigators were made aware of who is taking the drug and who is taking the sugar pills.

As part of the Gold standard, this treatment-randomization and double-blinded processes served to minimize confounding factors in the trials that could contribute to potential bias in the study's results. It is important to rule out the placebo effects for as much as 30% of patients taking the sugar pills, believing that they actually take the drug, would be cured from the disease per se.

In order gain the FDA's approval for obeticholic acid, Flint is only required to demonstrate OCA's ability to meet the primary outcomes in the study. Specifically, the primary outcomes for Flint includes (1) no worsening of fibrosis and (2) a decrease in NAFLD Activity Score ("NAS") of at least two points. These outcomes were evaluated by histological or cellular examinations based on preparations obtained from liver biopsies at one planned interim analysis and at the estimated primary completion date of Flint, which is around September 2014.

Nonalcoholic fatty liver activity score ("NAS") are determined based on the three metrics including steatosis, lobular inflammation, and ballooning. The maximum score is 8. An NAS of 1 or 2 corresponds to NAFL, 3 to 4 correspond to borderline NASH, and a score ≥ 5 correspond to NASH. The specific criteria for NASH include the following:

Steatosis (<5 percent = 0, 5 to 33 percent = 1, >33 to 66 percent = 2, >66 percent = 3)
Lobular inflammation (no foci = 0, <2 foci per 200 X field = 1, 2 to 4 foci per 200 X field = 2, > 4 foci per 200x field = 3)
Ballooning (none = 0, few balloon cells = 1, many cells/prominent ballooning = 2)

In contrast to what many investors would believe, the reversal of fibrosis is not an intrinsic requirement pertaining to NAS per se. Hence, it is not a necessity for OCA to reverse hepatic fibrosis rather the purpose of the drug is to treat NASH in order to halt the progression of fibrosis. The effectiveness of OCA in NASH's treatment was demonstrated in its ability to statistically improve NAFLD activity score.

Based on the interim data released on January 9, 2014, Flint distinctively met its met primary outcome, as evident by its p-value of 0.0024. This result far exceeded the p-value requirement of 0.00305 required for interim data. Given that the statistical significant threshold for the p-value for the final outcome data is only 0.49 (a much lower hurdle than what is required by the interim data), I strongly believe that it would be an easy task for OCA to achieve. Regarding the statistical determination associated with Flint,

O'Brien­Fleming statistical stopping guidelines for efficacy will be applied. This interim efficacy analysis will occur when approximately 50% (140 of the 280 patients) have completed both baseline and 72-week biopsies. Based on the Lan­DeMets method for group sequential trials using O'Brien-Fleming boundaries (Reboussin et al., 2000), the levels of significance for the interim and final analyses will be alpha=0.00305 and alpha=0.049, respectively.

I strongly believe that as long as OCA could stop the progression of hepatic fibrosis it would be approved by the Agency. Due to the highly favorable lives saving benefits-to-small risks of having unfavorable lipid profiles (that could be easily ameliorated), OCA is going to be highly prescribed by physicians. Whether OCA could reverse fibrosis remains is up to the jury but it is not a requirement for the FDA to approve OCA.

As I demonstrated in my previous paper, the virtue of OCA being able to suppress inflammation would show up as a surprise in September 2014 when the final outcome data for Flint will be release. However, investors could be in for a surprise as early as the middle part of 2014 with the release of the data for the trial that investigate the role OCA in treating primary biliary cholestasis ("PBC").

In addition to potentially treating NASH/PBC, the superbly amplified anti-inflammatory properties of OCA would endow the drugs to be highly efficacious/safe in treating other medical conditions. Based on my integrated lenses of a physician, researcher, an a writer, I take my step into the unknown to make prediction that one day, physicians would ubiquitously utilize OCA to treat many other medical conditions such as cardiovascular diseases, diabetes mellitus, and autoimmune diseases. Moreover, I speculate that OCA could also be utilized as a highly potent anti-aging medicine.

By virtue of OCA's 100x potency in activating what I believed to be the "holy grail" receptor (the farnesoid X receptor), OCA has the power to amplify the human body's innate power to heal and to rejuvenate itself. This could be the next leap in medicine, as well as, a catalyst to induce evolutionary pressure on mankind.

In my firm belief, OCA has the potential blockbuster not only similar to Lipitor rather it would surpass the illustrious one, Lipitor, by far. This decade is an exciting one for medical discoveries. The bottom line is that we only saw what appeared to be the tip of the iceberg and much remained to be seen in the story of OCA.

As with any investment decision, it is important for the investors to be cognizant of the risks. The risks for investing in Intercept involve the possibility of unfavorable data for PBC or the final outcome data for NASH. Regarding the FDA's decision, there is no such thing as a guaranteed approval. There could be delays in the approval process. In addition, investing in a biopharmaceutical entails significant PPS fluctuations in the short terms. Nevertheless, the intelligent/enterprising investors must approximate the odds of favorable gain and make his or her decision accordingly.

"Integrated Investing For All"

Disclosure: I am long ICPT. 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.

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