Intercept’s Fibrosis Success Gives Galectin High Hope
Intercept Pharmaceuticals (NASDAQ:ICPT) served as a catalyst for biotechnology firms in the fibrosis space on January 9. That’s when the company said that its Phase 2 trial of obeticholic acid (or, OCA) for the treatment of nonalcoholic steatohepatitis (or, NASH) was being stopped early after a Data Safety Monitoring Board determined the drug candidate had already met its primary efficacy endpoint. Shares skyrocketed about 550 percent in two days, packing on about $7.5 billion to Intercept’s market cap. Even with a recent pullback in value, the company’s market cap sits at $5.4 billion, despite not having any FDA-approved drugs.
The Intercept news also helped drive peer stocks higher, including doubling the value of Galectin Therapeutics (NASDAQ:GALT) and Conatus Pharmaceuticals (NASDAQ:CNAT) in the same initial 48 hours. Like Intercept, shares of both of these companies have consolidated some following the run, but their valuations of $222 million and $167 million, respectively, are still exceedingly lower than Intercept.
Some investors have theorized that there was a short-squeeze on Intercept with only 19.3 million shares outstanding and the vast majority of those shares being held by insiders and institutions. That may have played a small role in the run-up of shares, but a key dynamic in the valuation surge has to do with the acquisition of Pharmasset by Gilead Sciences (NASDAQ:GILD) in November 2011 for about $11 billion.
Gilead paid an 89-percent premium for Pharmasset, then trading on the Nasdaq exchange under the ticker VRUS, to get its hands on the company’s experimental oral drugs for hepatitis C — a viral infection that can lead to swelling of the liver that is primarily treated through injections today. At the time, Pharmasset had recorded a net loss of $91.2 million in the latest fiscal year and its lead drug candidate for hepatitis C was just completing mid-stage trials. Now designated Sovaldi, Gilead garnered FDA approval of the drug about six weeks ago as the first pill to treat specific types of hepatitis C without the injectable interferon.