Morningstar

Positive Trial Results for Intercept, Shares a Bargain

We continue to believe that the NASH opportunity is not fully baked into shares.

Intercept ICPT reported positive top-line results from its phase 3 results of obeticholic acid (OCA) in patients with liver fibrosis due to nonalcoholic steatohepatitis (NASH) on Feb. 19. The trial met one of its two primary endpoints (and therefore met its primary objective), with patients on OCA (25 mgs) showing fibrosis improvement with no worsening of disease after 18 months with high statistical significance. Further, patients on OCA (both 10 mg and 25 mg doses) showed a trend toward NASH resolution, but this did not reach statistical significance. These results support our long-term outlook for OCA in NASH, as we believe the 25 mg dose shows strong efficacy and has potential to be first to market, resulting in solid market share expectations in the medium term. However, we believe side effects leave room for competing drugs to take share in the long term.

Consistent with prior studies, common side effects were dose-dependent pruritis (severe itching) and heightened LDL cholesterol. While 51% of OCA 25 mg patients exhibited pruritis (compared with 19% placebo), only 2% of OCA 25 mg patients experienced serious cardiovascular events (compared with 2% placebo). We do not believe OCA's LDL-raising effects alone would bar the drug from prescriber adoption or approval. The company expects to file in the second half of 2019, and we expect more detailed interim data at a liver conference in April.

Overall, we think these results are in line with our expectations, so we don't anticipate any material changes to our model. We continue to believe that the NASH opportunity is not fully baked into shares, and we reiterate our $150 fair value estimate for Intercept.

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About the Author

Karen Andersen, CFA

Strategist
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Karen Andersen, CFA, is a sector director, AM Healthcare, for Morningstar*. In addition to leading the sector team, she covers biopharma firms in the US and Europe, focusing mostly on large-cap firms with foundations in biologic or gene-based medicines.

Before joining Morningstar in 2005, Andersen received a master’s degree in business administration from the Jones Graduate School of Business at Rice University, where she served as senior healthcare analyst for the M.A. Wright Fund and earned the distinction of Jones Scholar. She also holds the Chartered Financial Analyst® designation.

She ranked first in the biotechnology industry, and had the highest score overall, in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

Andersen holds a bachelor’s degree in biochemistry from Rice University, where she graduated magna cum laude. She is also a member of Phi Beta Kappa. She has scientific research experience in academia at both Rice University and the University of Queensland in Australia. She also worked in the healthcare industry, both at genetic testing firm Integrated Genetics (now part of LabCorp) and as a research assistant at Lexicon Genetics (now Lexicon Pharmaceuticals).

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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