(Reuters) – The U.S. Food and Drug Administration declined to approve Intercept Pharmaceuticals Inc’s therapy for a progressive liver disease, the company said on Monday, sending its shares down 37% before the bell.

The agency found that the predicted effectiveness of the treatment is uncertain and does not sufficiently outweigh its potential risks.

However, the FDA has recommended Intercept to submit additional post-interim analysis data from an ongoing late-stage trial for the treatment in support for the marketing application. (reut.rs/2ZhKnbP)

The therapy, chemically known as obeticholic acid, is designed to improve fibrosis, or the build up of scar tissue in the liver caused by non-alcoholic steatohepatitis (NASH), a chronic disease related to obesity.

“(The decision) means there will be a period of uncertainty here and this potentially raises the bar for all NASH companies and makes it a bit more murky as to what FDA wants to see for approvals in NASH,” Jefferies analyst Michael Yee said.

“We feel confident that companies with strong fibrosis benefits and very clean safety profiles will be approvable by FDA,” Yee added.

NASH, which affects around 25% of Americans and is poised to become the leading cause of liver transplants, has currently no approved treatment.

As fat-filled diets make bigger chunks of the global population prone to developing the disease, some analysts expect the market for NASH drugs to reach up to $35 billion.

“We are disappointed to see the determination the agency has reached based on an apparently incomplete review … and we are very concerned that the agency’s apparently still evolving expectations will make it exceedingly challenging to bring innovative therapies to NASH patients with high unmet medical need,” Intercept Chief Executive Officer Mark Pruzanski said.

The industry has been littered with disappointments, including last year’s trial failure of Gilead Sciences Inc’s three-drug combination.

Reporting by Saumya Sibi Joseph and Trisha Roy in Bengaluru; Editing by Arun Koyyur and Maju Samuel

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