Time is coming for Intercept Pharma to make a choice !  The new schedule implies that their level of cash does not allow them to reach the market.

A need to make a choice becomes urgent for INTERCEPT. The recent announcement of the change in the design features of their phase 3 NASH revealed a significant weakness of the company.

Presented as an improvement  in the chances of success of their study REGENERATE in NASH, which is indisputably the case, the announcement especially highlighted their obvious problem of recruitment, and therefore, planning.

Initially, 1,400 patients were to be recruited in the first half of 2017, and finally, only 750 will be recruited by mid 2017.

It is a clearly opportunistic change, because with such a recruitment rate, it would probably have to wait until mid 2018 to reach the 1,400 patients initially planned.

This implies that the end of the treatment of the patients necessary to obtain the intermediate results of phase 3 can not be expected before the end of 2018, beginning of 2019, and the results published only mid 2019.

As a result, with the administrative deadlines for regulatory agencies, marketing authorization can not be possible until early 2020.

The reduction of the cohort of patients studied for these intermediate results (250 patients per arm instead of 460) will inevitably weaken the results obtained.

The analysis of the agencies will necessarily be limited on the risks and side effects and will encourage them to be cautious. This will not facilitate accreditation.

At the end of 2016, INTERCEPT had $ 739,253,000 in cash. But their annual cash burning was $ 412,830,000 which implies that at this rate, and without new fresh money, the company could survive a maximum of 22 months from January 1, 2017, either by October 2018, perhaps a little more if OCALIVA's PBC sales revenue increases a bit, which remains to be proven.

Three solutions are available :

- A new call to the market,

- A partnership with a major pharmaceutical company,

- A full sale of the company to an actor with all the cash needed to complete the development.

To devellop a little the different options, we need to dwell a little on the strengths and weaknesses of Intercept in the potential market of NASH. 

The results of OCALIVA in the treatment of NASH are still uncertain. 

On the one hand, the results of the FLINT study are encouraging. On the other hand, the conditions for carrying out the study are debatable and the results of another study done in Japan are frankly wrong.

Furthermore, with regard to side effects, the increase in LDL and pruritus associated with OCALIVA are  now well documented and there are also unresolved questions about the potential carcinogenic effect of the FXR-induced increase in FGF19 level.

On the positive side, it should be noted that OCALIVA has already obtained a provisional marketing authorization for the treatment of PBC which could facilitate or even accelerate a second authorization for the treatment of NASH if the results of Phase 3 are positive.

It is therefore honest to say that for now, OCALIVA still has a lot to prove in NASH. Although the valuation of INTERCEPT has dropped significantly in recent times, it remains well above the valuations of its competitors. That's why the appeal to the market once again seems difficult, not impossible, but difficult.

The logic would be that, approaching the date of its potential placing on the market and, not having the sufficient cash to be able to hold, INTERCEPT seeks to establish a partnership or to sell itself.

Regarding a M&A, and the uncertainties that still hang over the success of OCALIVA in NASH, a multi-stage agreement with payments according to milestones seems most likely. However it is not sure that this is the most profitable strategy for INTERCEPT.

It all depends on the confidence of the INTERCEPT team in OCALIVA's chances of success in NASH.

If they really believe they will seek to establish a distribution deal and keep the licenses for them, this is exactly the strategy announced by its competitor GENFIT who seems particularly confident in the future of their drug, ELAFIBRANOR.

If they have doubts, they will try to sell prior to the results of Phase 3, but their eagerness is likely to produce the effect that an acquirer may smell a rat ! 

The potential price could suffer.

What price INTERCEPT could expect as valorization?

If we start from the point of view that they will succeed in phase 3 in  NASH, one can then refer to the market forecast studied on this site which potentially evaluates the annual turnover peak at approximately $ 4.8 billion .

This could mean that a deal would be possible between $ 10 billon and $ 20 billion, but all the aforementioned uncertainties could seriously lower this price, especially if the deal occur before the results.

Anyway, I think that the shooting window for a deal or a capital increase of INTERCEPT has just opened. 

The shooting window of its main competitor GENFIT, still largely undervalued, is also approaching and the imaginable amounts could be even higher.

To be complete, it is also necessary to follow carefully the two outsiders GALECTIN and GALMED who also enter in this critical period, but maybe for smaller deals.

We are approaching the last straight, the last turn will be the announcement by  INTERCEPT and GENFIT of the end of their recruitment for the intermediate results needed to obtain a temporary agreement of their drug. No doubt that from this moment, everything will become possible, even the unimaginable!

G. Divry

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