Intercept Pharmaceuticals said Friday it will restructure itself after the Food and Drug Administration rejected its liver disease treatment. ICPT stock wavered on the news.
Wall Street largely expected the rejection. Last month, a panel of advisors to the FDA overwhelmingly said the benefits of Intercept's treatment for nonalcoholic steatohepatitis, or NASH, don't outweigh the risks. And 15 out of 16 panelists said the drug, obeticholic acid, shouldn't receive an accelerated approval.
On Thursday, the FDA put the final nail in the coffin lid for obeticholic acid in NASH treatment. Based on the rejection letter, Intercept says it would need to run — at a minimum — a long-term outcomes study to resubmit its application for approval to the FDA. Instead, Intercept shuttered its NASH program.
The company will cut a third of its workforce and shift its research focus to rare liver diseases, Intercept said in a news release.
On the stock market today, ICPT stock alternated between gains and losses. At the close, shares gained 1.7%, ending the regular session at 11.74.
ICPT Stock: A Spectacular Dive
Intercept was once a Wall Street darling. Shares peaked at 497 in 2014. But ICPT stock has fallen over the last four years and is now trading at less than a tenth of its value in late 2019.
Much of its stress has come from the effort to tackle NASH. NASH is the second leading cause of liver transplants, and there are no approved treatments. Further, patients don't experience symptoms, so the disease must be confirmed through an invasive and expensive liver biopsy.
To gain approval, a drug must either improve liver damage called fibrosis while leading to no worsening in fatty liver disease. Or the drug can resolve fatty liver disease, but can't lead to worse fibrosis.
Without the NASH approval, Intercept is now switching gears. The company already sells obeticholic acid under the brand name Ocaliva for patients with a liver disease known as primary biliary cholangitis. The decision is "financially rational," SVB Securities analyst Thomas Smith said in a report.
"The cut of NASH-related spending could result in meaningful savings as Intercept had previously indicated that NASH represented one-third of (research and development) expense and a budget of about $50 million for one-time NASH launch expenses in 2023," he said in a report.
Smith has a market perform rating on ICPT stock.
Intercept Eyes Profitability In 2024
Cutting the NASH program will help Intercept become profitable as early as 2024, the company said.
In addition, Intercept lowered its adjusted operating expenses guidance to $350 million to $370 million for the year. It still expects $310 million to $340 million from Ocaliva in primary biliary cholangitis.
Intercept is now focusing on a fixed-dose combination of Ocaliva and another drug called bezafibrate as a potential best-in-class treatment for primary biliary cholangitis. That combination is in midstage testing.
Needham analyst Joseph Stringer noted Intercept's profitability will be dependent on maintaining share in primary biliary cholangitis. Rivals Genfit and CymaBay Therapeutics will have Phase 3 results of their potential treatments in the second and third quarters of this year, respectively. It's important to note, both Genfit and CymaBay have shuttered their own NASH programs.
"We believe a positive outcome for either of the programs would be a clear negative read-through to Intercept," Stringer said in a report. He has a hold rating on ICPT stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
