Inside the $3 billion biotech preparing to launch the first treatment for NASH, a silent disease that affects millions of Americans

• NASH is a liver disease that affects millions of Americans. Researchers expect it to become the leading cause of liver transplants in the US within the next few years.
• The drug industry has suffered multiple failures in the hunt for NASH treatments over the years.
• But now, Intercept Pharmaceuticals is preparing to launch the first-ever treatment for NASH. The treatment still needs to be approved by US regulators.
• If approved, Intercept plans to focus on about 500,000 Americans. Wall Street analysts anticipate the drug will eventually generate $3.5 billion in yearly sales, according to the market research firm EvaluatePharma.
• Intercept CEO Mark Pruzanski talked with Business Insider about the company's commercial strategy and plans to establish the market for the disease.
• Visit Business Insider's homepage for more stories.

In the early 2000s, Mark Pruzanski was running Intercept Pharmaceuticals from the living room of his West Village apartment.

For those first five years, Intercept scraped by as Pruzanski attempted to convince potential investors that a little-known liver disease called NASH could be treated with a drug his firm was working on.

Now 18 years into Intercept's story, Pruzanski is still at the helm as CEO and still based on the west side of Manhattan. And he's still arguing with skeptical investors and doctors about the potential market for his liver disease drug.

What's different is the company. Now a $3 billion pharma firm with more than 600 employees, Intercept operates out of a bespoke corporate headquarters in Hudson Yards and is on the cusp of bringing the first-ever treatment for NASH to market this year.

If all goes to plan, Intercept will pioneer the fight against a major liver disease. That could help millions of Americans get earlier treatment and avoid liver transplants, particularly if more NASH drugs follow Intercept to market in the coming years. Wall Street analysts anticipate the drug will eventually generate $3.5 billion in yearly sales, according to the market research firm EvaluatePharma.

Intercept PharmaceuticalsIntercept Pharmaceuticals CEO Mark PruzanskiA controversial approval and launch for Intercept

NASH is likely the most prevalent liver disease that most people have never heard about. Short for non-alcoholic steatohepatitis, NASH's signature is the build-up of liver fat in people who drink little or no alcohol.

Fueled by rising rates of obesity and diabetes, NASH is on pace to become the leading cause of liver transplants in the US within the next few years, research has predicted. The disease is silent, or symptomless, until it's fairly advanced. Eventually, it can cause liver failure, and the only treatment right now is adopting a healthier lifstyle.

The disease has been a hot topic in biotech for the past few years. As the biotech industry witnessed high-profile NASH failures last year, Intercept stood alone in succeeding.

The pharma firm remains the only company with positive results from late-stage human trials in treating the liver disease. A US approval decision is expected in June, after a Food and Drug Administration expert panel evaluates Intercept's pill, called obeticholic acid, at an April 22 meeting.

Approval and commercial success are far from guaranteed, as Intercept faces the challenges of creating the NASH market.

Initially, the company will focus on a smaller population of about 500,000 people with more severe versions of the liver disease.

The CEO said Intercept will price its pill in line with specialty drugs for small patient populations, but declined to provide a range.

The same drug, called Ocaliva, has already been approved to treat a rare liver disease at a price of about $84,000 a year, before rebates and discounts. For NASH, the company has applied for a distinct brand name that can carry a separate price.

"What we are not intending to do is price higher," Pruzanski said, referencing the price tag on Ocaliva.

Pruzanski said he is confident the drug will be approved and succeed commercially - eventually growing into a blockbuster drug with yearly sales exceeding $1 billion.

But investors are skeptical. Intercept's stock has stayed roughly flat over the past year, while a leading biotech index gained about 15% in that same time period.

Pruzanski acknowledged the uncertainty surrounding not just Intercept's drug but the disease as a viable market. The investor debate ramped up after Intercept announced initial positive results a year ago, he said.

"It's a new space - there are no yardsticks out there," Pruzanski said in a recent interview with Business Insider. "It's a little bit of a Rorschach test."

"There remains uncertainty about everything, from how big the market truly is, how fast it will develop, what pricing and reimbursement is going to look like, and how the competitive landscape will evolve," he added. "Despite those questions that remain to be answered, the opportunity clearly is very substantial."

Estimates on the prevalence of NASH vary greatly, but there is widespread agreement that several million Americans have the disease, potentially as many as 20 million. Precise figures are hard to calculate, because of the lack of treatment or an easy test for the disease.

The typical recommendation from most doctors is lifestyle changes, such as diet and exercise. That can be effective in resolving NASH for many people, but Pruzanski and other biotech executives in the NASH drug development space see plenty of room for therapeutic interventions.

The end of a gold rush

Even if the disease is under the radar for the general public, the biotech investment community is well aware of it.

NASH drew major attention starting in 2014, when Intercept's stock skyrocketed up more than 500% after the company released promising results, showing the company with a clear lead in getting a NASH treatment to market. The company's market value climbed as high as about $9 billion.

That got attention of the largest drugmakers, which rapidly bought their way into NASH with acquisitions and licensing deals. The huge patient group stands out against an increasing industry focus on rare diseases and smaller markets.

"There was no real big market out there in the pharma world," B. Riley FBR biotech analyst Mayank Mamtani said in an interview. "Everything was going small with gene therapy, rare disease, and oncology."

Leading drugmakers including Allergan, Novartis, Bristol-Myers Squibb, and Shire all jumped into the space. Four of their deals exceeded $1 billion in combined upfront payments - and all four drugs subsequently failed or brought mixed results, according to recent research by B. Riley FBR.

Last year brought more high-profile failures, headlined by Gilead Sciences. The big California biotech disclosed several late-stage trial failures throughout the year - in February, April, and December.

Read more: The competition's heating up over a $35 billion market to treat NASH, a 'silent disease' millions are living with. But the early results look mixed.

With a new CEO in Daniel O'Day, who started less than a year ago, Gilead's future in NASH remains unclear. The disease was only mentioned on the company's last earnings call when an analyst brought it up. A Gilead exec responded by characterizing fibrosis as a challenging area.

David Woodhouse is CEO of NGM Biopharmaceuticals, which is also working on several potential NASH treatments. He said the lesson learned from last year is there are no shortcuts in NASH drug development.

"It's just really not that simple," Woodhouse said on a recent industry panel. "Being more thorough in development rather than trying to find the shortcuts is beneficial."

Even after a difficult 2019, there are at least a dozen drugmakers with ongoing NASH clinical trials, ranging from tiny biotechs to pharma giants like Novartis and Pfizer.

Intercept stands alone

Because Gilead and other drugmakers have suffered failures in researching NASH treatments, Pruzanski's company is gearing up to go into the NASH market alone. That requires reaching clinicians and patients to boost awareness of the disease and, ideally, demand for Intercept's drug.

To do that, the company is planning to hire a salesforce of 150 that will focus on educating doctors who specialize in treating liver diseases.

Approval and commercial success will likely hinge on how regulators and doctors interpret the clinical results for Intercept's drug.

The trial tested two doses. While the stronger dose succeeded in showing a difference from placebo in improving NASH, it also led to itching so severe that some people stopped taking the drug. While more tolerable, the weaker dose showed less clinical benefits than the high dose.

Additionally, Intercept will have to figure out how to identify patients. To enroll patients in the trials, scientists used a biopsy, a procedure that can be lengthy and uncomfortable. Non-invasive tests are being developed - one trial was published earlier this month, for instance.

Even with these questions, Baird analyst Brian Skorney likes Intercept's chances, particularly given the lack of any other treatments coming soon.

"It's really the only thing out there for the near future for NASH," Skorney said. "It's been such a graveyard of failures because the biology is so poorly understood."

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