Intercept: Opportunity To Buy On Potential NDA Resubmission Of Ocaliva For NASH

Summary

  • Intercept expects pre-submission meeting with FDA in the 1st half of 2022 as long as new REGENERATE NASH data warrants potential accelerated FDA approval.
  • It is estimated that the global NASH market could reach $20 billion by 2027.
  • Topline results from the phase 3 REVERSE study using Ocaliva for the treatment of patients with NASH compensated cirrhosis are expected Q3 of 2022.
  • Full-year 2022 sales of Ocaliva have been guided higher to be between $375 to $405 million.
  • I do much more than just articles at Biotech Analysis Central: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Scientist using pipette in research laboratory

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Intercept Pharmaceuticals (NASDAQ:ICPT) is a good speculative biotech to look into. That's because it has a few catalysts rapidly approaching in 2022, which hold the potential to move the stock price higher. These two catalysts are very risky, but the way I look at it is that it already has an FDA approved drug known as Ocaliva. Ocaliva has been approved by the FDA to treat patients with primary biliary cholangitis (PBC). The big reason why I bring that up is because the company is seeing growth as it relates to this drug for this indication. Matter of fact, full-year net sales of Ocaliva were $363.5 million, which was a growth of 16% year over year. In other words, even if the company can't refile its NDA for Ocaliva in NASH right away, it will still generate sales regardless. Speaking of which, it is hoping to have enough data from the phase 3 REGENERATE study in order to eventually refile submission of its NDA to the FDA for potential approval of Ocaliva in non-alcoholic steatohepatitis (NASH). If it can obtain the necessary data from the study for accelerated approval, then it hopes to have a pre-submission meeting with the FDA in the 1st half of 2022. Not only that, but it has another shot on goal with Ocaliva. That is, it is currently being explored in a phase 3 study known as REVERSE. This study is crucial because it is targeting patients with compensated cirrhosis due to NASH. Results from this study are expected in Q3 of 2022. These are risky catalysts, and with them not coming to the forefront, I could see the stock tanking down to $5 per share. The filing itself as well might only end up being a delay possibly. Even then, you would be buying a biotech that is generating Ocaliva sales of roughly greater than $300 million per year anyways.

Ocaliva For The Treatment Of Patients With Non-Alcoholic Steatohepatitis

The first program to go over involves the potential use of Ocaliva, which is being developed for the treatment of patients with NASH. Non-alcoholic steatohepatitis is a liver disease. In essence, it is a liver disease characterized by the buildup of liver fat with little or no alcohol as the name suggests. It is estimated that the global NASH market could reach $20 billion by 2027. The cause of this disease is unknown, but there are several risk factors you can look to, which may increase the risk of having it. Such risk factors include:

  • High cholesterol
  • Type 2 Diabetes (T2D)
  • Obesity
  • Gastric Bypass surgery

These are just a few risk factors. The point is that the accumulation of fat on the liver over time causes damage to the liver. Specifically, for non-alcoholic fatty liver disease (NAFLD) the liver starts to deteriorate, but the patient is not yet at risk. It is once the NAFLD advances to NASH, when there is concern. Why is that? That's because once progressed to NASH, the patient starts to have inflammation and fibrosis of the liver. As the fibrosis progression of the liver starts to deteriorate, that then moves over to another disease which is liver cirrhosis. Lastly, from there, hepatocellular carcinoma (liver cancer) can take hold. The current treatment option involves weight loss. Doctors will tell their patient to lose weight, because the hope is that by losing weight the patient will see a reduction of liver fat content. In turn, theoretically that should help the liver heal itself of the fibrosis. However, continuous damage pretty much counters that.

The thing is that Intercept was supposed to have FDA accelerated approval of Ocaliva for NASH. However, that all fell apart when the FDA gave Intercept a complete response letter (CRL) stating that it could not support such approval based on the data received. The stated reason was that it had determined that the surrogate histopathologic endpoint remains uncertain and does not outweigh the potential risks. Having said that, this was a huge blow for the company who did not expect such an action. That's the bad news, but years later there is a potential inflection point.

Intercept expects that it will be able to obtain additional data from its ongoing phase 3 REGENERATE study, to possibly move towards accelerated FDA approval. Meaning, that it intends to have a pre-submission meeting with the FDA in the 1st half of 2022. This is contingent upon the fact that it must obtain positive data from the REGENERATE study in order to accomplish this task. If it does not obtain the right data according to the FDA, then it will not be able to file for accelerated approval. This is a major risk and you should be aware of that. It is quite possible then that Intercept may have to wait until this study is completed and that is expected in 2025.

The phase 3 REGENERATE study intends to recruit up to a total of 2,000 adult NASH patients with stage 2 and stage 3 fibrosis. The goal of this study is to conduct analysis on the effect of Ocaliva in liver histology comparing month 18 biopsy with baseline. Patients with biopsy-proven NASH with fibrosis were randomized 1:1:1 to receive one of three doses:

  • Placebo once-daily
  • 10 mg Ocaliva once-daily
  • 25 mg Ocaliva once-daily

A repeat biopsy was done about 18 months out for histologic endpoint assessment. If a patient didn't end up having a repeat biopsy, then they were automatically considered non-responders. The primary endpoint was fibrosis improvement ≥1 stage with no worsening of NASH at the planned 18-month interim analysis. The primary endpoint was met in that those who took 25 mg of Ocaliva had seen a statistically significant improvement at 18 months. This gave a statistically significant p-value of p=0.0002 versus placebo. On the other hand, the other primary endpoint of NASH resolution with no worsening of liver fibrosis did not achieve statistical significance. Intercept was in the belief that, when speaking with the FDA, it only needed to achieve one of these primary endpoints to receive accelerated FDA approval of Ocaliva for NASH. However, that's not what ended up happening with a CRL being given. In terms of safety, the drug was safe and tolerable. The amount of adverse events were similar across all 3 of the treatment arms I described above. They were seen in:

  • 11% of patients on placebo
  • 11% of patients given 10 mg Ocaliva
  • 14% of patients given 25 mg Ocaliva

The hope is that the new data will be enough so that the FDA will allow for accelerated approval of Ocaliva for NASH. Again, if all goes well, then a pre-submission NDA meeting is expected in the 1st half of 2022.

Additional Shot On Goal Of Ocaliva For Treatment Of Patients With NASH

The thing is that there is another possible catalyst that is expected in Q3 of 2022. This involves the readout of the phase 3 REVERSE study, which is using Ocaliva for the treatment of patients with NASH compensated cirrhosis. What exactly is NASH compensated cirrhosis? With NASH, fatty deposits cause liver inflammation. When it gets to the point of cirrhosis, it is the stage where late-stage scarring (fibrosis) of the liver starts to occur. Such fibrosis occurs because your liver attempts to heal the damage, but in turn causes the formation of scar tissue. The more scar tissues that are formed, the worse it is for your liver to attempt to perform its normal functions. This is where compensated cirrhosis due to NASH comes into play. With NASH compensated cirrhosis, the liver is still able to perform most of its functions, but not as well as it used to.

The phase 3 REVERSE study is evaluating the safety and efficacy of Ocaliva in NASH patients with compensated cirrhosis. It is expected that about 900 patients will be randomized into one of three arms of the study as follows:

  • Once-daily 10 mg Ocaliva
  • Once-daily 10 mg Ocaliva for the first 3 months with titration in accordance with study protocol of up to OCA 25 mg for remaining study period
  • Once-daily placebo

The primary endpoint will be the percentage of patients with histological improvement in fibrosis by at least one stage with no worsening of NASH using the NASH Clinical Research Network (CRN) scoring system after 18 months of treatment with Ocaliva. This is another good shot on goal, especially since it is the only late-stage study in compensated cirrhosis due to NASH. Not only that, but there are no approved therapies for it either and remains an unmet medical need. There is a catalyst opportunity for investors to look forward to here. It is expected that topline results from the phase 3 REVERSE study for compensated cirrhosis due to NASH will be released by Q3 of 2022.

Financials

According to the 10-K SEC Filing, Intercept Pharmaceuticals had cash, cash equivalents, restricted cash and investment debt securities for sale of approximately $429.4 million as of December 31, 2021. With the current cash on hand, plus sales of Ocaliva for PBC, it anticipates that it will have enough cash on hand to fund its operations for at least the next 12 months from the filing date of the 10-K SEC Filing. This SEC Filing was filed on March 2, 2022. I believe that it will likely have to raise cash again by the 2nd half of 2022. I think if it was to do so, it likely would do so after a positive news event causing the stock to trade higher. My guess would be if it can have a successful pre-submission meeting with the FDA of Ocaliva for NASH in the 1st half of 2022. If it can file its NDA for this drug during this period, then it will likely cause the stock to trade higher. At which point, I anticipate it to immediately move to raise cash at this time. Either way, it's going to have to raise cash before the end of 2022. As I noted above, it has been generating net sales of its Ocaliva drug for the treatment of patients with PBC. Full-year 2021 sales of Ocaliva reached $363.65 million, which was a year-over-year growth of 16%. Even better than that, the company is guiding slightly higher for 2022 expecting sales of the drug to reach between $375 to $405 million.

Risks To Business

There are a few risks that investors/traders should be aware of before investing here. The biggest risk of all would be the pre-submission meeting with the FDA of Ocaliva for NASH. That's because the FDA is always unpredictable and there is no guarantee that the new package of REGENERATE data will be enough for it. That means Intercept will be unable to refile its NDA to the FDA in order to receive regulatory approval of the drug. As long as the data warrants accelerated approval, with the FDA's blessing, then an NDA resubmission can occur in 2022. Otherwise, if the REGENERATE study must be completed first, then that could take many years. It is not estimated to be completed until 2025 and that will be a long wait for NASH data, which may or may not ultimately yield FDA approval for the drug. The second risk would be the data readout expected from the phase 3 REVERSE study using Ocaliva for the treatment of patients with NASH compensated cirrhosis. Results from this late-stage study are expected in Q3 of 2022. Data from REGENERATE for NASH was mixed in that one primary endpoint met while the other primary endpoint didn't. Having said that, the compensated cirrhosis population have scars/liver damage far worse than just NASH alone. This will be a riskier study and success is not guaranteed. The final risk would be the need to raise additional cash. It believes it only has enough cash on hand for at least the next 12 months, which means that it will need to possibly raise cash by the 2nd half of 2022.

Conclusion

I believe that Intercept Pharmaceuticals is a great speculative biotech to look into. There are two major catalysts approaching that are very risky. However, it has already received FDA approval of Ocaliva for the treatment of patients with PBC. If both catalysts noted above suffer a setback, then it won't be so bad anyways. Intercept is still generating sales of its PBC drug which is still growing. This is proven by the full-year 2022 sales guidance given for Ocaliva by Intercept, which are expected to be higher than full-year 2021 sales. I view this heavily as a speculative play, but with great opportunity if it all works out. The ability for the FDA to give a green light on allowing NDA resubmission for Ocaliva in NASH would be huge. With a few catalysts approaching, I believe that it has a shot at potentially recovering from its CRL setback. In a worst-case scenario, this will end up becoming a much longer-term hold if the FDA wants to see full data from the REGENERATE study. As this data is not expected for a few years from now.

This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to, I'm currently offering a two-week free trial period for subscribers to take advantage of. My service offers a deep-dive analysis of many pharmaceutical companies. The Biotech Analysis Central SA marketplace is $49 per month, but for those who sign up for the yearly plan will be able to take advantage of a 33.50% discount price of $399 per year.

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