The 1 Pharma Stock That Feels Like Microsoft in 1986

The 1 Pharma Stock That Feels Like Microsoft in 1986 June 7, 2017
By Mark Terry, Breaking News Staff

Many people wish they had invested in Microsoft (MSFT) or Apple in the 1980s. Or in biopharma, Gilead Sciences . Someone who bought 50 shares of Microsoft after its initial public offering (IPO) in 1986 at $28 per share, even if they didn’t reinvest dividends, would have stock worth over $1 million today. If you invested $1,000 into Apple in 1980, you’d currently have around $228,113. And if you had invested $1,000 in Gilead after its IPO in January 1992, you’d have hit about $100,000 in 2015.

Are there any biopharma stocks today that have the feel of Microsoft in the ‘80s or Gilead in the ‘90s? Sean Williams, writing for The Motley Fool, thinks there is: Intercept Pharmaceuticals .

Located in New York City, Intercept focuses on non-viral liver diseases. But it is the company’s drug, Ocaliva, that has Williams intrigued. Currently approved for the treatment of primary biliary cholangitis, Ocaliva is being evaluated as a therapeutic for non-alcoholic steatohepatitis (NASH). Sometimes called the “silent liver disease,” it resembles alcoholic liver disease, but appears in people who drink little or no alcohol. However, it can be quite severe and lead to cirrhosis. There are no approved treatments.

Williams writes, “The first drug that can fight NASH—and potentially even reduce liver fibrosis—could become the go-to therapy, just as Windows is the go-to operating system.”

Several years ago, Ocaliva, in the FLINT 2b trial, showed a reduction in the NAFLD Activity score in 46 percent of patients taking Ocaliva of two points or more. That compared to 21 percent of patients on placebo. Williams says, “What was exceptionally encouraging was the 35 percent mean score benefit in liver fibrosis, which was almost double that of the placebo at 19 percent. Currently, Ocaliva is moving on to its pivotal Phase III REGENERATE trial.”

There are quite a number of players in the race for a NASH drug, including Gilead, Allergan , Genfit and others.

Intercept is generally considered to be closest to the market with a therapy for NASH. Its compound, obeticholic acid (OCA), is an FXR agonist. On February 10, the company provided an interim update that also included changing its endpoints and the definition of NASH improvement. In a conference call with investors, the company’s chief executive officer, Mark Pruzanski, said, “First, we are amending our co-primary endpoint from fibrosis improvement and NASH resolution to fibrosis improvement or NASH resolution. We originally designed REGENERATE to include both primary endpoints based on the FLINT trial results, which showed that OCA treatment resulted in improvement in all key aspects of NASH, notably in fibrosis. While we of course remain confident in demonstrating efficacy on both endpoints, this protocol change effectively gives us two shots on goal.”

A 2014 Deutsche Bank industry report titled ‘NASH—the next big global epidemic in 10 years?’ estimated that the market could peak at $30-40 billion by 2025.

Williams writes, “What sort of sales are we talking about here? If Ocaliva demonstrates both NASH resolution and fibrosis improvement (the REGENERATE trial only requires one or the other be met for the primary endpoint to be a success) and is approved by the FDA ahead of Genfit’s drug, Ocaliva has peak annual sales potential that could approach $9 billion. Given that drugmakers are usually valued at many multiples of their lead drug, Intercept’s stock could soar—much like Microsoft did.”

Intercept is currently trading for $117.93.

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