Intercept Pharmaceuticals said it will lay off a quarter of its workforce, or approximately 170 employees, in response to the Food and Drug Administration’s rejection of the New York biotech’s liver disease drug in June. The restructuring is aimed at reducing Intercept’s expenses, the company said in a regulatory filing Tuesday. Most of the layoffs will occur in the third quarter and be “substantially completed” by the end of the year, according to the filing. Intercept had expected to win FDA approval of its chief drug, obeticholic acid, to treat a liver condition known as NASH that is thought to affect millions of Americans. The regulator, however, wasn’t convinced by the company’s study results and asked for more data that could take a year or more to collect.
An approval would have made obeticholic acid the first drug for NASH, an opportunity that Intercept and its investors hoped would greatly boost the company’s prospects.
Instead, the FDA’s rejection put Intercept’s plans on hold, spurring a stock sell-off and, now, a significant restructuring. Shares in the company trade at about $45 a piece, roughly one-tenth what they fetched in January 2014, when a mid-stage study suggested obeticholic acid could work to address the progressive liver scarring that’s characteristic of NASH, or non-alcoholic steatohepatitis.
Intercept was able to confirm obeticholic acid’s benefit in a follow-up study, although results showed only one in four moderate-to-severe NASH patients experienced significant improvements in scarred liver tissue without their disease worsening. Intercept remains the only company with positive data from a Phase 3 NASH trial.
Yet the FDA questioned whether those results proved the drug’s benefits outweighs its risks. In a complete response letter issued to Intercept, the agency said it wants to see more efficacy and safety data from the company’s study. If the FDA requires longer-term outcomes results, Intercept may not be able to resubmit obeticholic acid for a second attempt at approval until 2022, according to one Wall Street analyst.
Intercept does hold an approval for obeticholic acid in a different liver disease called primary biliary cholangitis, but sales there have been modest.
The company last month lowered its forecast for operating expenses in 2020 to between $460 million to $500 million, a range it reiterated Tuesday. Intercept previously eliminated its contract sales support and put on pause preparations it had been making for a NASH drug launch.
The planned layoffs will reduce Intercept’s spending in 2021, but the biotech didn’t specify any target savings in the regulatory filing.
In early August, Intercept said it was planning to meet with the FDA soon to determine what, exactly, it would need to resubmit obeticholic acid for approval in NASH.