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Shares of Intercept Pharmaceuticals ( ICPT ) were falling Friday after Morgan Stanley downgraded the stock, saying that a positive FDA panel vote nonetheless pointed toward a restrictive label for its lead drug. Trading in Intercept stock was halted all day Thursday as the advisory committee discussed obeticholic acid, now branded Ocaliva, eventually resulting in a 17-to-0 vote in favor of approving the drug to treat a rare liver disease called primary biliary cholangitis (PBC). The FDA will make a final decision on the drug, and what recommendations will be on its label, by May 29. Morgan Stanley analyst Andrew Berens wrote in a research note that issues raised during the panel discussion could limit the potential market. “The panel unanimously recommended to approve the drug based on the surrogate endpoint used in the phase 3 trial, but failed to endorse usage in advanced PBC patients given the lack of data supporting efficacy, as well as safety concerns,” Berens wrote as he downgraded Intercept stock to underweight from equal weight and lowered his price target to 80 from 100. “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 wrote. Berens added that the panel also expressed reservations about using the drug in patients with advanced cirrhosis, or scarring of the liver, due to signs of liver toxicity at high doses. He wrote that this could have implications for Ocaliva’s much-anticipated future launch in non-alcoholic steatohepatitis (NASH), a market that could potentially bring in billions. “We had previously assumed usage of Ocaliva in up to 20% of cirrhotic patients,” Berens wrote. “Given the concerns voiced by the clinicians and the FDA, we have decreased our penetration into NASH patients with cirrhosis to 5% at peak.” Intercept stock, which rose more than 8% Wednesday to a nearly four-month high, fell by as much as 10% in the stock market today . Shares were down 5.5% midday Friday, near 155. Other analysts generally stuck by their ratings on the stock. RBC Capital Markets analyst Michael Yee wrote that the possible PBC restrictions were in line with his below-consensus sales estimates for that indication, but he added that the company could still be an interesting buyout target for a big pharma name like AstraZeneca ( AZN ) or Sanofi ( SNY ). Credit Suisse analyst Alethia Young still says the PBC launch could beat expectations and wrote that the severe cases may not be that much of the market. “We think perhaps at worst the severe population is 15% of patients,” she wrote in her research note affirming an outperform rating. “Based on the super-group study, Intercept thinks 12% may be a high watermark.” Scalper1 News
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