Intercept Soars on Successful Testing of Liver Drug

Intercept Pharmaceuticals Inc., whose top owners include SAC Capital Advisors LP and Orbimed Advisors LLC, rose the most ever after a trial of its liver disease drug worked well enough for the testing to be stopped.

Shares of the New York-based company more than tripled to $275.87 at the close in New York time. Over the last 12 months, investors anticipating a positive outcome for the treatment had more than doubled the stock as of yesterday’s close.

Intercept’s obeticholic acid, or OCA, treats nonalcoholic steatohepatitis, or NASH, a liver disease in which people who don’t drink or drink very little alcohol suffer damage that resembles that of heavy drinkers. Eventually, the disease can cause scarring and hurt the organ’s ability to function. About 2 percent to 5 percent of Americans have the disease, according to the National Institutes of Health.

The illness “is possibly one of the few remaining large untapped markets that we could compare to the LDL or diabetes market and is rapidly growing,” Jonathan Eckard, an analyst with Citigroup Inc., wrote in a note to clients, referring to a measure of bad cholesterol.

While the cause of the liver disease is unclear, it largely occurs in middle-aged people who are overweight or obese, and is often symptomless early on, according to the NIH. After basic blood tests reveal liver problems, a biopsy is needed to identify the disorder. Both NASH and fatty liver disease, a similar illness, are becoming more common, according to the NIH, possibly driven by rising rates of U.S. obesity.

Second Stage

Intercept’s drug is in the second of three stages of testing typically required before regulatory approval. The company doesn’t know the details of a final-stage trial because the results released today were a surprise, Chief Executive Officer Mark Pruzanski said.

“This is truly unexpected news,” Pruzanski said in a telephone interview. “The bar for terminating the study for efficacy was so high it seemed inconceivable.”

It’s not known whether the Food and Drug Administration will let Intercept use liver biopsies as an endpoint, as the agency has discussed in the past, or whether regulators may require the company to show that their drug lowered rates of liver failure and death, he said. The second scenario would take longer to conduct a Phase 3 trial.

In a trial of 283 patients who got either the drug or placebo, the therapy was shown to be effective in getting a measurement of the disease to drop by at least two points on an eight-point scale, Intercept said today in a statement.

Wider Market

The drug is also being developed for primary biliary cirrhosis, a rare liver disease that Pruzanski said affects about 300,000 patients worldwide. The company should have final-stage data for the drug in that population in the second quarter of this year.

With a large patient population, Intercept would likely need a sales force to market the drug to doctors for the more common disease. Last year it reported having 25 employees in a corporate filing. It owns the rights to the drug outside of Asia, Pruzanski said, and could seek a partner or buyer.

“We’re going to consider our options going forward,” he said.

The gain today by Intercept is bigger than any stock in the Russell 3000 Index with a market value of $5 billion or more, according to data since Oct. 30 compiled by Bloomberg. The biggest gain of the day since then averaged 15 percent, and Intercept’s move is almost 20 times that. The only time any stock has come close to the advance since October was when Twitter Inc. soared 73 percent on its first day of trading.

‘One-Trick Pony’

“When you see a move like that, it’s obviously a company that usually does one-trick pony,” Channing Smith, who helps oversee about $1.4 billion at Capital Advisors Inc. in Tulsa, Oklahoma, said in a phone interview. “Investors obviously believe the market potential and the impact on earnings and revenue are dramatic. It’s a game changer.”

More than half the company’s shares are owned by Milan-based Genextra SpA, a closely held firm that specializes in drug research, and three investment firms. Pruzanski described Genextra, which holds 31 percent, as an investor and long-term backer. SAC Capital, the hedge fund founded by Steven Cohen, owns 5 percent. Fidelity Investments and Orbimed are the other top two holders.

Buying Shares

SAC and Fidelity both built their holdings as the stock gained since June of last year. SAC increased its stake in the company by 64 percent, according to a Nov. 7 filing, while Fidelity’s holding rose by 18 percent as of Sept. 30.

Investors, especially in biotechnology and pharmaceutical stocks, often build up or sell shares in companies ahead of major events like drug trials. SAC is closing its hedge fund business and turning it into an family office managing Cohen’s own money under an agreement to settle charges that the fund used inside information in similar trades. The U.S. government called it the biggest insider trading scheme ever discovered.

The U.S. probe into SAC is continuing. Cohen’s firm agreed in November to plead guilty and pay a record $1.8 billion for perpetrating an insider-trading scheme stretching back to about 1999. Jonathan Gathalter, a spokesman for SAC, declined to comment in an e-mail.

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