Shares of Intercept Pharmaceuticals (ICPT) dropped early this week when documents attained through an FOIA request were made public, painting a picture of a management team downplaying safety issues with the company’s lead drug candidate, obeticholic acid (OCA). Adam Feuerstein at theStreet.com broke the story on Tuesday morning. Although the lipid abnormalities seen in the phase 2 FLINT trial (OCA in nonalcoholic steatohepatitis, or NASH), have been public knowledge for months, the documents raise questions about the trial’s early stop – impressive efficacy versus concerning safety – as well as management’s credibility.
On January 9 of 2014, Intercept reported that the phase 2 FLINT study had been stopped early based on a planned interim analysis showing that the primary endpoint of the trial had been met. The trial was being conducted by the National Institute of Diabetes & Digestive & Kidney Diseases (NIDDK), an arm of the National Institutes of Health (NIH). Intercept’s press release made no mention of the lipid abnormalities, and ICPT jumped more than 500% in the two trading sessions following.
In a highly abnormal move, the NIDDK issued its own statement a day later, disclosing that the interim results also found “disproportionate lipid abnormalities (increased total cholesterol with increased LDL and decreased HDL cholesterol) in patients on OCA compared to those on placebo.”
The FOIA documents reveal that Intercept was informed in the days leading up to the FLINT press release that the decision to stop the trial early was based on the positive efficacy and the negative safety signal: “. . . the NIDDK decision to terminate therapy was primarily due to the efficacy effect but, in part, influenced by the significant lipid abnormalities observed in the OCA treated patients.” Not only did Intercept management know about the abnormalities before the press release that sent the stock climbing multifold, but the early stop was not based on efficacy alone.
At risk of oversimplifying the bull/bear debate, where would ICPT have traded in early January had Intercept’s press release recognized that the trial was stopped for efficacy and safety?
From $70 to $230, where the stock trades today? It’s difficult to imagine ambiguity would have been good for 220%.
Intercept believes the FLINT unblinded data will be provided to the company in July. Investors will get a picture of OCA’s clinical profile in November when the NIDDK presents the full dataset at the annual AASLD Liver Meeting.
When data are presented in November, the magnitude of the lipid effect that will be first thing on investors’ checklists. OCA could still be a meaningful treatment for NASH patients if the lipid effect is manageable, and at $220 and a $4.5B valuation the market is optimistic.
