Reeling From FDA Rejection, Intercept Pharma Slashes Headcount by 25%

[Corrected, 9/2/2020. See below.] Intercept Pharmaceuticals is cutting one-fourth of its workforce, a decision that comes two months after the FDA rejected its drug candidate for the liver disease nonalcoholic steatohepatitis (NASH).

Up until the FDA’s rejection of the drug, obeticholic acid (Ocaliva), Intercept (NASDAQ: [[ticker:ICPT]]) had been preparing for a drug launch. In a Tuesday securities filing, the New York company attributed the layoffs to the FDA’s negative decision. About 170 Intercept employees are affected by the cuts, which the company says will enable it to streamline operations and reduce expenses while also maintaining resources to support its drug programs—including the failed NASH drug.

NASH is characterized by fatty buildup in the liver, which leads to inflammation and scarring of the organ. It’s sometimes referred to as a silent disease because symptoms aren’t always apparent and it can only be diagnosed with a liver biopsy. But the damage caused by the disease is a leading driver of liver transplants. There is no FDA-approved therapy for NASH, though a number of companies are developing potential treatments. Intercept was, at one time, regarded as a front-runner among them.

The Intercept drug, a once-daily pill, was designed to bind to a receptor that regulates the creation of bile acids, which in turn, is meant to trigger activity that combats fibrosis, inflammation, and fat retention. The drug beat a placebo in reducing fibrosis in the liver— one of two goals of a Phase 3 study. Based on earlier discussions with the FDA, Intercept contends that meeting one of the goals was enough to support regulatory approval. Now the company is preparing for a meeting with the FDA to discuss the rejection letter and the path forward for the drug. Last month, in its report of financial results for the second quarter of this year, Intercept said it plans to meet with the regulator “as soon as possible.”

Obeticholic acid won FDA approval in 2016 for treating primary biliary cholangitis (PBC), a rare liver disorder. The drug is Intercept’s only commercialized product, and it accounted for $149.9 million in revenue in the first half of this year, a 27 percent increase compared to the same period in 2019, according to the company’s financial reports.

In the meantime, other NASH drug developers are gaining ground. A clinical hold on a drug candidate from CymaBay Therapeutics (NASDAQ: [[ticker:CBAY]]) was lifted in July. For now, the Newark, CA-based company is prioritizing development of the drug in PBC, where it might have a side effect advantage over the Intercept drug. There are other companies still in the chase for a NASH treatment, but some observers say South San Francisco-based Akero Therapeutics (NASDAQ: [[ticker:AKRO]]), with a drug it licensed from Amgen (NASDAQ: [[ticker:AMGN]]) has early Phase 2 data suggesting that it could become the best of the drug candidates in development for the disease. [Paragraph updated to correct Akero’s location.]

Intercept said in the regulatory filing that it expects to record an $18 million charge consisting of severance pay and other termination expenses. The company expects most of those charges will take place in the third quarter of this year. The company reported having $540.6 million in cash and cash equivalents as of June 30.

Public domain photo by Flickr user Qasim Zafar