Intercept takes lead for new liver drug after Genfit stumbles

Reuters Health Information: Intercept takes lead for new liver drug after Genfit stumbles

Intercept takes lead for new liver drug after Genfit stumbles

Last Updated: 2015-03-27

By Bill Berkrot

(Reuters) - Intercept Pharmaceuticals Inc has moved to the front in the race to produce treatments for non-alcoholic steatohepatitis (NASH) following the failure of a rival drug from France's Genfit in a midstage clinical trial, according to analysts and investors.

Intercept and Genfit are two drugmakers that are farthest along in developing treatments for NASH.

Genfit on Thursday said its experimental drug, GFT505, fell short of the primary goal of reducing NASH in the closely watched Phase II study.

Genfit shares plunged more than 44 percent in Paris on Friday after the news, while Intercept's U.S.-listed shares rose more than 8 percent on Thursday and another 4 percent on Friday to close at $293.91.

Deutsche Bank raised it price target on Intercept shares to $400 from $300, and cut its Genfit rating to "hold" from "buy."

"From Wall Street's standpoint, they've taken Genfit out of the equation and elevated Intercept," said Len Yaffe, portfolio manager of the StockDoc Partners healthcare fund, who closely follows the liver disease space. The fund holds shares in Intercept and Gilead Sciences, which closed down 7 cents on Friday at $101.

Nomura analyst Ian Somaiya said the Genfit result "cements Intercept as the premier NASH story in biotech," according to a research note.

Genfit said the miss was primarily due to unexpectedly high rates at which NASH was resolved on its own for patients with the mildest form of the disease who received a placebo. Genfit Chief Scientific Officer Dean Hom said excluding mild NASH patients, the drugs' effect was "quite robust," and Genfit promised to forge ahead with a better-designed large Phase III trial.

Shares of tiny Conatus Pharmaceuticals have climbed more than 30 percent to $7.77 since it released positive data from a midstage trial on its fatty liver disease drug, emricasan, early on Thursday.

"The market has done a pretty good job of sorting things out in NASH," said Les Funtleyder, healthcare portfolio manager for ESquared Asset Management. But the competitive landscape may still change significantly once companies begin to release results from larger Phase III studies, he said.

Gilead has a large portfolio of liver disease treatments, including a promising experimental drug that directly targets fibrosis, or scarring that results from assaults on the liver such as NASH.

But with billions of dollars coming in from its already-approved hepatitis C treatments, it is far less vulnerable to news from small players working on rival drugs.

Yaffe is enthusiastic about Gilead's anti-fibrotic drug simtuzumab. He does not believe the other perceived leaders in the space, including Intercept, Genfit, Galectin Therapeutics , Israel's Galmed or Conatus, will ultimately win the day in NASH.

Yaffe singled out two drugs in earlier stages of development not yet on Wall Street's radar.

He said Durect Corp's DUR928 "looks incredibly promising in being able to prevent fibrosis and inflammation," adding that it may have promise in acute kidney injury as well as NASH.

Yaffe also likes cenicriviroc, which Regado Biosciences is about to acquire through a merger with Tobira Therapeutics. Both Durect and Regado shares currently trade for under $2.

"If either one of those drugs is successful, the stocks will go up 10 to 40 fold," he said.

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