Intercept Pharmaceuticals (ICPT) : issues warning regarding Ocaliva

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Intercept Pharmaceuticals (ICPT) dove Tuesday after the firm issued a letter warning physicians against overdosing some patients with Ocaliva, which has been tied to liver injuries and death.

In early trading on the stock market today, Intercept toppled 18%, near 93.10. Shares hit their lowest point in 19 months. More broadly biotech stocks dipped 1.4%.

The letter warned physicians about post-marketing cases of liver injury, liver decompensation, liver failure and deaths in patients with liver impairment and a rare disease known as primary biliary cholangitis who receive Ocaliva more frequently than recommended.

"In addition, serious liver adverse events have been reported in patients initiating therapy without cirrhosis or with mild liver impairment," Intercept said in its letter. "Liver-related adverse events have occurred both early in treatment and after months of treatment."

Current Ocaliva dosing recommendations are for 5 milligrams once a week in primary biliary cholangitis patients with liver impairment. Primary biliary cholangitis is a chronic liver disease resulting from the progressive destruction of bile ducts in the liver.

The warning could weigh on Ocaliva sales and help eventual sales of seladelpar, a treatment from CymaBay Therapeutics (CBAY) that is being investigated in primary biliary cholangitis, says Leerink analyst Joseph Schwartz. Seladelpar has a different mechanism and better safety profile.

"Further down the road, if others such as etrasimod (from Arena Pharmaceuticals (ARNA)) can show competitive (effectiveness) and safety profile, Ocaliva could face competition on multiple fronts, thereby increasing the important of Ocaliva's prospects in nonalcoholic steatohepatitis," he said.

Schwartz reiterated outperform ratings on CymaBay and Arena stocks. He rates Intercept at market perform.

He notes the warnings regarding liver injury and death were included on Ocaliva's label for some patients with liver impairment. These issues were also raised at the advisory committee meeting. Still, the safety notice is a headwind for Ocaliva's base business, he said in a note to clients.

"Intercept has enjoyed a robust launch trajectory to date," he said. "In the second quarter, however, management's more tempered expectation for the remainder of 2017 increased investor caution and the stock has accordingly been weak."

He added: "Today's letter/disclosure, in our view, will likely add another layer of caution as physicians may find Ocaliva dosing more cumbersome and patients more reluctant to initiate therapy."