Intercept Falls as CEO Says It May Need Drug Partner

Intercept Pharmaceuticals Inc. (ICPT) fell the most in more than a year as Chief Executive Officer Mark Pruzanski said he may need the help of a larger drugmaker to bring the company’s experimental liver-disease treatment to market.

The complex and poorly recognized liver disorder, called nonalcoholic steatohepatitis or NASH, occurs most often in people who are overweight or have diabetes. Marked by a slow but dangerous buildup of fat and inflammation that can damage the liver, it’s symptomless early on and complicated to diagnose.

It’s too early to predict when the drug, a form of obeticholic acid, may be marketed, Pruzanski said. While the company said last week the treatment reached its goals in an early trial, spurring a sixfold stock rise, a finding it may also boost cholesterol may cast a pall on a therapy for a condition that’s not widely understood.

Although the cholesterol “link is not new news, we believe many investors are seeing it now for the first time,” Akiva Felt, an analyst at Oppenheimer & Co. in San Francisco, wrote in a report to clients today.

Intercept shares fell 18 percent to $364.36 in New York, their biggest drop since they first began trading in October 2012. The shares of the New York-based company soared over the previous two trading days to $445.83 on Jan. 10, after closing at $72.39 on Jan. 8, the day before the early study was released.

Trial Halted

The trial announced last week was devised to test the Intercept drug in 283 people over 72 weeks. It was halted when some patients showed marked improvement in lab tests. Intercept will work with U.S. regulators to design a larger study to determine whether the product, expected to be taken daily for a lifetime, is both safe and effective, Pruzanski said.

Exactly what that study will look like and when it may start are still undetermined.

“The market needs to be prepared, educated and developed, but the momentum here is accelerating in terms of awareness of the disease, and its implications for liver-related morbidity and mortality,” Pruzanski, who is set to speak this week at the JPMorgan health-care conference in San Francisco, said in a telephone interview yesterday.

The testing was ended after doctors found reduced signs of inflammation, fat build-up and cell death in liver biopsies. Only about half the patients had completed the trial when a monitoring board determined the results were so substantial that further effort wasn’t needed to prove its main goals, sparing the remainder of patients from unneeded biopsies.

Cholesterol Rise

At the same time, patients taking the Intercept drug saw their total and bad cholesterol levels rise more than those given a placebo, according to Pruzanski. He said it’s unclear what caused the increase or what significance it may have. The trial was sponsored by the National Institute of Diabetes and Digestive and Kidney Diseases.

The company’s current plan “is very much to build a commercial capability,” the CEO said in the interview. “But large pharmaceutical companies are very good at this kind of thing. And the overarching responsibility here is to do what we can in a responsible way to get” the drug to patients, should it be approved.

“If that can be done in a more expedited fashion with a partner, that’s something we should consider,” he said.

Physician Caution

Doctors, meanwhile, were cautious in their assessments of the treatment’s immediate potential.

While health officials estimate the disorder may affect as many as 5 percent of Americans, given the growing number of obese people in the U.S., there’s no way to tell for sure because the illness is most often detected by chance -- for example, when an insurer requires a liver test, said Vijay Shah, chair of gastroenterology and hepatology at the Mayo Clinic in Rochester, Minnesota. A biopsy is needed for a definitive diagnosis.

“What we have is a proof of concept study,” said Nezam Afdhal, head of hepatology at Beth Israel Deaconess Medical Center in Boston. “‘How that becomes a registration trial and an approvable drug is a million-dollar question.’’

While promising, longer studies in a sicker patient group are needed to prove the drug is beneficial, according to Afdhal.

The U.S. Food and Drug Administration has indicated it would consider a surrogate endpoint, a marker for improvement in patients with disease, for expedited or conditional approval, Intercept’s Pruzanski said. That means the medicine may be approved initially based on imaging changes, liver function tests or biopsies that indicate disease improvement. The company would then follow the patients for years to confirm the benefit and win full approval, he said.

FDA Pro-Active

‘‘The FDA has been proactive and has clearly demonstrated they understand there is an unmet need here,’’ he said. ‘‘We are searching to establish appropriate surrogate endpoints that might be used for approval in this slow moving disease.’’

A sped-up approval process would help the company stay competitive. Two years ago, a National Institutes of Health trial found that vitamin E improved the health of patients with the condition, and at least four other companies are working on potential treatments for NASH.

Rivals include Conatus Pharmaceuticals Inc., Galectin Therapeutics Inc. Raptor Pharmaceuticals Corp. and Gilead Sciences Inc. (GILD), which already has a monoclonal antibody in mid-stage studies for patients with more severe disease who have scarring in the liver, with a goal of reversing the damage.

More Data

More information will become available about drugs targeting the disease in the next 18 months, and combination therapy may one day be considered, said Liisa Bayko, an industry analyst at JPM Securities in Chicago.

The market opportunity, though, is large, Bayko said, with about 9 million potential patients in the U.S. alone.

Shah, at the Mayo Clinic, said a conservative approach focusing on weight loss, lowering cholesterol and controlling blood sugar doesn’t work well in holding off NASH. A medication to modify the disease progression would be very important, he said in a telephone interview.

Now few people are actually diagnosed with NASH, a common phenomenon with many liver diseases where screening isn’t always conducted, said Zhiping Li, director of hepatology at Johns Hopkins University in Baltimore. In the early stages there are often no symptoms and it isn’t found during routine annual exams, he said in a telephone interview.

Little Follow-Up

Additionally, doctors often don’t properly follow up on irregular laboratory results and patients don’t push it because they don’t feel badly, according to Li. If the drug is approved, though, patients may have to undergo an uncomfortable liver biopsy to see who gets it, he said.

At the same time, the Intercept drug may make its way on to the market earlier, targeting a related disease.

The company is also in the third and final stage of study for primary biliary cirrhosis, a different and much less common disorder. The chronic disease is marked by destruction of the ducts that ferry bile out of the liver, allowing it to build up and cause injury. The compound was designated an orphan drug in the U.S. and Europe for treating the disease.

While the FDA may want additional research to quantify the benefits in patients with NASH, it’s possible some doctors will prescribe the drug to those patients if it becomes available for primary biliary cirrhosis, the Mayo Clinic’s Shah said.

‘‘It’s a very important disease, but it’s a long, long process,” said Beth Israel’s Afdhal. “Nobody develops problems from NASH over a year or two, or even a decade. It’s a 20- to 30-year process. These are really exciting results and very good for the field, but it’s much more complicated than people think it is.”

To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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