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Intercept Looks to Be First in Lucrative Market


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Equity Analyst On The Healthcare Team For Morningstar

But the pipeline of competing drugs is full, so we don’t see a moat for the biotech.

Intercept Pharmaceuticals (ICPT) is an emerging biotechnology company with one of the most advanced pipeline candidates for nonalcoholic steatohepatitis, or NASH, a massive market with high unmet need. Obeticholic acid, or OCA, is already approved in primary biliary cholangitis, a rare liver disease, which provides the company with steady revenue but is limited to a small patient population. Intercept’s valuation depends heavily on OCA’s potential in NASH.

NASH is a common but serious liver disorder linked to obesity and diabetes, with limited treatment options. Liver fat buildup leads to fibrosis, the thickening and scarring of liver tissue, which could progress to cirrhosis, liver failure, heart disease, and death. OCA has shown impressive efficacy in improving fibrosis in phase 3 trials, but its side effect profile, which includes severe itching and increased bad cholesterol, leaves room for competition down the road. However, given its advanced stage in the pipeline, Intercept has a high likelihood of being first to the lucrative NASH market in 2020.

The stakes in NASH are high, with a crowded pipeline contending for a slice of the $30 billion-plus market opportunity. We believe the potential segmentation of the NASH market will support multiple therapies and combinations, with later-stage NASH presenting a more lucrative opportunity. Closely following Intercept’s OCA is Genfit’s (GNFTF) elafibranor, with phase 3 data likely read out by the end of 2019 and a potential launch in late 2020. Other NASH competitors include Allergan’s (AGN) cenicriviroc, Madrigal Pharmaceuticals’ (MDGL) MGL-3196, Galectin Therapeutics’ (GALT) GR-MD-02, Galmed Pharmaceuticals’ (GLMD) Aramchol, Viking Therapeutics’ (VKTX) VK2809, and Gilead Sciences’ (GILD)  combination therapy, which could launch between 2022 and 2023.

Gilead reported disappointing trial results for selonsertib in cirrhosis in early 2019, slightly improving the playing field for Intercept, but its combination therapy remains a contender. We believe that competition (that is, drugs with strong efficacy and minimal side effects) will probably erode Intercept’s market share in NASH after 2023, but its first-mover status provides the company with a strong advantage.  

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