Morgan Stanley Downgrades Intercept Shares To Underweight, Cuts Target To $80

Although Ocaliva in primary biliary cholangitis (PBC) has received the backing of an FDA panel, the panel did not endorse the drug for use in patients with advanced PBC, while recommending restrictions for use in non-responders and cirrhotics due to concerns regarding liver toxicity and safety.

Morgan Stanley’s Andrew S. Berens downgraded the rating on Intercept Pharmaceuticals Inc ICPT from Equal-Weight to Underweight, while lowering the price target from $100 to $80.

Berens mentioned that the FDA panel’s decision could “impact the PBC label & launch, as well as usage in NASH cirrhotics.”

What The FDA Panel Said

The Gastrointestinal Drugs Advisory Committee of the FDA unanimously recommended the approval of Ocaliva, based on the surrogate endpoint for the Phase 3 trial, while stopping short of recommending the drug for advanced PBC due to safety concerns and the lack of data to support efficacy.

Related Link: Intercept Jumps 5%, Confirms FDA's Unanimous Decision To Recommend Accelerated Ocaliva Approval

“According to external consultants, the primary unmet medical need in this patient population is in patients with advanced or aggressive disease, so this lack of an endorsement by the panel has important commercial implications in our opinion, especially if the label is similarly restrictive,” Berens stated.

In addition, the panel expressed concerns regarding the use of Ocaliva in patients with cirrhosis, due to the trial data revealed some dose related liver toxicity.

In fact, the panel recommended “a less frequent dosing regimen be used in PBC patients with liver compromise and that patients be discontinued from treatment that do not respond within a specified time (6 or 12 months) given safety and tolerability concerns.”

Potential Impact

Berens believes that these restrictions could limit the commercial opportunity of the drug in PBC significantly, while also impacting the launch.

The peak PBC revenue estimate has been lowered from $148 million to $117 million.