FDA Letter On Intercept Pharma Doesn't Include Black Box Warning Label...Yet

One of the main takeaways from the FDA's letter is the absence of any mention of a black box warning, Leerink's Joseph Schwartz commented in a research report. However, the FDA's tone and language used in the letter "could tilt the FDA" more toward a black box warning in the future.

Specifically, the letter stated that Ocaliva "may also be associated with liver injury in some pts. with mild disease who are receiving the correct dose," the analyst continued. Also, the FDA's "narrative about the high number of deaths (19) and worsening of PBC cases (7/19) strikes us as particularly concerning."

Meanwhile, it remains unclear what impact the letter will have on Intercept's NASH which is currently in an ongoing phase 3 trial and doesn't have an orphan indication, not well-diagnosed and makes use of higher doses of the therapy.

"Overall, while the liver risks are not totally new since they were highlighted at the advisory committee meeting (AdCom) and are already included in the label (which may not be changed), we believe the fact that milder patients may also be at risk and that REMS tools may not be able to identify who is most at risk could necessitate a black box warning in the FDA's view," the analyst wrote.

Bottom line, the FDA's letter could "significantly constrain" Intercept's market opportunity and adds an additional level uncertainty on its NASH opportunity.

Baird: Buyers Of The Stock

Intercept's stock selloff should be considered as an "overreaction" to the FDA's letter, which is considered to be a " drug safety communication that is more detailed than last week's Dear HCP letter," Baird Equity Research's Brian Skorney commented in a research report.

Skorney maintains an Outperform rating on Intercept's stock rating with an unchanged $332 price target as the FDA's letter doesn't contain any readouts that is of concern, especially when factoring in the characteristics of the patients the company treats.

In fact, the deaths detailed in the FDA's letter should not be surprising or of any particular concern to investors given the state of the patients and that serious liver injuries will occur at some low background rate "given the nature of the disease."

The analyst's FOIA (freedom of information) request reveals an additional seven deaths since July, which implies a total of 26 as of Sept. 13. However, it is not yet known if this represents an acceleration or deceleration of deaths but it nevertheless represents around 0.5 percent of all Ocaliva patients.

"Given the severity of the disease and the increasing number of patients on Ocaliva, it really should not be surprising that deaths are occurring," the analyst emphasized. "However, investors are clearly spooked by the idea that the drug itself may be causing severe liver injury in patients with more severe hepatic impairment who cannot sufficiently clear the drug."

At time of publication, shares of Intercept were down 13.05 percent at $64.08.