Tom Hughes

FLINT, NASH, And Biotech: How Big Things Happen

Posted May 6th, 2014 by Tom Hughes, in Biotech investment themes, From The Trenches, Pharma industry, Translational research


On January 9th, 2014, Intercept Pharmaceuticals (ICPT) released a very interesting piece of news regarding their Phase 2 FLINT (Farnesoid X Receptor Ligand Obeticholic Acid in Nonalcoholic Steatohepatitis Treatment) trial.  FLINT, a test of their FXR agonist obeticholic acid (OCA) in 283 patients with established nonalcoholic steatohepatitis, (NASH), was stopped early due to highly positive results in their primary endpoint.  Intercept’s stock price rocketed from $72 per share to over $445 in two days.  What’s more important was that NASH became a disease of interest for investors, biotech companies, and big pharma.

Why does this matter, and what can we learn from it?

First, a little primer on NASH.  Fatty Liver, NASH, NAFLD, liver fibrosis, cirrhosis, and hepatocellular carcinoma represent a continuum of diseases that result from chronic fat overload in the liver that is followed by inflammation and fibrosis of the liver.  It is, put simply, obesity of the liver thought to be driven by a high fat diet, high insulin concentrations, and other unknown insults.  Unlike what many people think, it is NOT related to alcoholism.

NASH results from liver-focused obesity that has gone bad over the course of years.  In cases that result in liver cancer or outright liver failure, it has gone really, really bad.  It’s a huge issue in Asia, in part due to the genetic makeup of the population that focuses weight gain in abdominal fat tissue and in the liver of individuals consuming rich diets. Accumulation of fat in the abdominal compartment and liver drives a lot of mischief – including hyperlipidemia, type 2 diabetes, and of course, NASH.

Like established obesity, it’s really tough to treat NASH once it has taken hold.  Existing therapeutic approaches include dietary regimens, fish oil supplementation, and vitamin E treatment, none of which have been shown to have particularly large effects on the disease.

Unlike obesity, but like many types of cancer, you can’t see NASH easily without biopsy, imaging, or special blood work.  It’s currently thought that up to one-fourth of the adult population of the US, and correspondingly large segments of other countries, have developed fatty liver, and about 3-4 percent of adults have progressed to full-blown NASH and have angry and inflamed livers.

There has been a recent spike in liver disease in adolescents, due to severe obesity, leading to an increase in liver transplants.  What’s more, livers from people with fatty liver make poor donor organs, and an alarming percentage of potential donor livers are loaded with fat.  The 10-year outlook for people with NASH is that about 2-5% will die from liver-related conditions, a death rate that is higher than the average. As the severity of liver fibrosis worsens, so increases the likelihood of liver-related death.

The NASH-related death rate is similar to the death rate from Hepatitis C.  Unlike NASH, we have taken Hepatitis C very seriously from a medical perspective – it has been the focus of intense activity in the pharma industry for many years.   Intercept is the first serious player on the field.

Why did it take a tiny company like Intercept to bring this problem to light?

Here are a few ideas that relate to company culture.

  1. Drugs impacting diseases with uncertain regulatory paths are harder to develop than drugs for diseases with known treatments and established regulatory guidance.  Because they are harder to develop, they are much less attractive to risk-averse organizations.  If you are running R&D at a large company with many projects (let’s say hundreds of projects), you are less likely to place bigger bets in areas that you don’t know, or where your internal teams have less comfort.  The result is a sort of ‘channeling’ that tends to occur, in which you won’t look for diseases or therapeutic approaches out of your area of focus, and you won’t likely embrace a novel discovery if it means you are working out of your comfort zone.  It’s also true that most investors get skittish when a clear registration path is lacking, although one strategy discussed recently by Mike Gilman here, relates to ‘bundling’ therapeutic plays into a broader mechanistic concept such as proving the effect of a drug on a relevant disease process, such as fibrosis, to make it more palatable to prospective pharma buyers.
  2. Mechanistic insights that could potentially lead to advancement of an already discovered drug into a novel disease area are challenging to bring to light in large organizations, particularly if it means going down a more risky development path.  Generally speaking, large organizations and their discovery staff are driven by highly constrained division, group, department, and lab-level objectives.  Promotions, pay raises, bonuses, and in some cases lab budgets hinge on meeting already challenging annualized objectives that simply don’t take into account the kind of shorter-term insights and longer-term innovation that would lead people into new areas.  If you’re a scientist with a KPI (key performance indicator) that says ‘Advance two new programs for type 2 diabetes’, you are less likely to put the effort into advancing one program for fatty liver or NASH.  It simply takes too long to sort out.  Whether mid-level managers of R&D will admit it, the kind of personal energy and executive effort required to break out of the channel can simply be too great to muster in the face of a hectic corporate existence.  This is something that is not well-understood by top-level managers of large pharma organizations.
  3. Small companies excel at taking risks, in no small measure, because they must. Small asset-focused companies like Intercept are more likely to embrace a challenge that might otherwise be considered to be ‘out of their league’.  I’ve experienced this since moving from my big pharma job to Zafgen.  When you are 100 percent committed to advancing something unique and innovative, you become more flexible in your thinking about potential indications and regulatory paths.  Being deeply familiar with the mechanism of your compound, you also become more open to the idea of allowing the asset to ‘find its way’ to an energy minimum that provides the best fit between your molecule and the disease it best fits.

It may be more challenging from a regulatory perspective to open up a field as imposing as NASH, but the program may be more likely to succeed in a therapeutic approach that fits well to its inherent effects than it would be if it were ‘forced’ to work in ‘garden variety’ obesity, type 2 diabetes, or dyslipidemia.  I’d add that FXR – the drug target being affected by Intercept’s molecule OCA – was worked on extensively by big pharma – but for diabetes.  The target failed to show attractiveness in part due to increased cholesterol levels in animals treated with FXR compounds.  I’m personally aware of one program in large pharma that was shut down because it didn’t show enough promise in diabetes, even though it was recognized to be of potential value in the fatty liver-NASH arena.  It was inertia that stopped it – plain and simple.  The big company simply didn’t have interest in taking the risk.

The NASH story is not dissimilar to the recent performance of large pharma and small biotechs in the obesity area – the regulatory approach, pricing, reimbursement, and medical use of obesity therapeutics have been driven entirely by small-to-mid sized companies, while big pharma has stayed away.  Obesity is the largest pandemic of the modern age, and it’s interesting to see just how steadfastly the problem is being avoided by large companies that certainly have the resources and brain-power needed, but are not aligned in a way that promotes innovation in this particular space.   Intercept, aligned and committed to maximize the utility and value of their assets, ran with the ball for indications well-suited to their FXR modulators – NASH and rare diseases including primary biliary cirrhosis – in which OCA is showing promise in the clinic, portal hypertension, and bile acid diarrhea.

Fundamentally, the emerging fatty liver / NASH story relates to real issues in the pharma and biotech industry. 

As a field, we all are tempted to drink the Kool-Aid that says “no existing market, no regulatory path, no program.”  In 2013 there was no market for NASH drugs- no drug company had ever made money in fatty liver.  Also, the target physician wasn’t clear (it is now likely the hepatologists treating hepatitis and who are frustrated with their lack of tools to fight fatty liver/NASH).   NASH has suffered in general from its share of unknowns.

There is a bias against running tough trials, and Intercept took on tough trials to win big. 

NASH suffers – at least for the time being – from having a tough clinical path that requires liver biopsies from patients in the trials.  Biopsies, while commonplace in other indications (particularly oncology, dermatology, and even hepatitis viruses), are very unpopular in the metabolic field.  Why?  Who knows?  They work and they tell you very clearly what is going on in the patient’s liver.

So, it is tough as a drug hunter in a large organization to convince anyone that a market is worth pursuing if you are lacking a target physician, if you might need to conduct biopsies to prove the effect of the compound, and if a clear return is unknown.  It took guts for Intercept to head down that path rather than to try to force their compound(s) into a well-trodden regulatory path.

What’s on the horizon for the NASH regulatory front?  Word on the street is that FDA is likely to come out with regulatory guidance on NASH this year.  It will be interesting to see if they will accept evidence of histological changes and/or functional changes in the liver, such as portal venous pressure, for an approval.  Certainly for the more severe cases of NASH, this would bring much needed care to patients who otherwise will progress rapidly to liver failure.  If outcome trials are required, it will be interesting to see if they are required pre- or post-approval.  Clarity is often elusive in drug development, and it will be fascinating to see how Intercept navigates these next steps, particularly with respect to their investors, who will certainly have opinions on what should and should not be done.  As mentioned earlier, there may well be an ‘energy minimum’ that could allow a provisional approval path to be open for OCA with a focus on high(er)-need patients, while the broader approval is ironed out.  It makes a lot of sense to seek a creative solution if possible – it’s good for business and it is good medicine, too.

One last thought.  Despite the recent remorse shown by some investors and their lawyers regarding their decision to buy Intercept stock at its peak price in January, it’s nice to see the team at Intercept be recognized for doing something worthwhile, whether or not they had to. It also confirms, for a lot of us, what this ecosystem can do to support innovation.  Let’s hope there are more and more examples in the coming years.  It’s good for patients, and it makes for a great story, too, so let’s keep watching.

One thing for sure is that the land grab for NASH therapies is on, and you can be sure that big pharma will be moving – slowly – into the space as well.

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