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Morningstar | Intercept's OCA is the most advanced NASH candidate in development, but the pipeline is crowded.

Intercept Pharmaceuticals is focused on drug development for chronic liver diseases. Its key program, obeticholic acid, or OCA, is being evaluated in the potential megablockbuster indication of nonalcoholic steatohepatitis, or NASH. The molecule received approval under the marketing name Ocaliva in the orphan indication of primary biliary cholangitis, or PBC, in patients with an inadequate response to, or unable to tolerate, ursodiol, the only other approved therapy in the space. While PBC is an attractive opportunity on its own, the clear value driver for the firm is NASH.NASH is a potential $30 billion market opportunity as it is a common but serious liver disorder linked to obesity and diabetes with limited current treatment options. While many firms are vying to address this disease, OCA is a leader in this pipeline race, alongside Gilead's selonsertib, both of which are expected to release pivotal data in 2019. Other advanced NASH candidates, including Allergan’s cenicriviroc and Genfit's elafibranor, could report data in 2020. OCA’s strong phase 2 results showed impressive efficacy, but its concerning side effect profile--namely, increased bad cholesterol levels in a patient population with cardiovascular comorbidities--could limit the drug's market share. Phase 2 Control results showed OCA's cholesterol-raising profile can be properly managed, but there are still residual safety concerns. We think OCA will see strong uptake initially given the limited treatment options for NASH patients, but with a crowded pipeline and strong near-term competitor, OCA needs to demonstrate stellar efficacy--showing both antifibrotic impact and NASH resolution--to maintain significant market share in the long run. The stakes are high. With supportive data from phase 3 trial Regenerate evaluating OCA in NASH (expected in the first half of 2019), Intercept could capture a lucrative share of the NASH market. A bad readout could could limit the firm to smaller liver indications or less lucrative subset of the NASH population.