The four-times World Hurdle hero was aiming for a 19th consecutive victory in the Grade Two contest and travelled powerfully in the hands of first-time rider Sam Twiston-Davies on his first start in well over a year.
The 11-year-old led his rivals over the final flight, but was caught on the run-in by shock winner Knockara Beau and At Fishers Cross, beaten three-quarters of a length.
Nicholls admits it was disappointing to see his stable star’s winning run come to an end, but feels there are plenty of positives to take from the run ahead of his bid to regain his World Hurdle crown back at Cheltenham on March 13.
“He has come out of the race absolutely fine. His legs are cold and he is absolutely A1, which is obviously the main thing,” said the Ditcheat handler.
“He travelled with all his old enthusiasm and jumped great and he has just got a bit tired after the last (hurdle), which he was entitled to after 14 months off.
“I think the ground from the bend to the last was as soft as it was anywhere on the track and it has probably just found him out, but all in all there were a lot of positives to take from the race.
“I think he’ll improve enormously for the run and another thing I think is the key to him is better ground. All his best runs have come on better ground and hopefully we’ll get that at Cheltenham in March.
“In a normal year, if he’d had his runs at Newbury and Ascot, I wouldn’t have even entertained running him on that ground on Saturday, but I had to get a run into him.
“We’d done as much as we could with him at home. We went out to win the race, as we have done for his last 18 races and unfortunately he hasn’t, but you can’t win every race.”
Twiston-Davies has come in for some criticism since the race after letting Big Buck’s stride into the lead a long way from home.
Nicholls, however, was perfectly happy with the ride and does not feel it was the difference between victory and defeat.
He said: “People forget he made all the running when he beat Reve De Sivola in the Long Distance Hurdle at Newbury (on his final run before injury) when Ruby (Walsh) rode him.
“If he’d have won yesterday there would have been no questions asked (about the ride). There is nothing to say if Sam had held him up the result would have been any different. “Sam rode him positively, the horse travelled well and quickened up nicely. He was just changing his legs when he got on the worst of the ground in the straight and has got tired.
“If he’d had a run beforehand and quickened up and won a couple of lengths yesterday, we probably wouldn’t be having this conversation.
“It was a difficult situation. If he’d have won, we’d have been heroes and now he has been beaten there’s been a bit of criticism, but I’m pleased with how the horse performed and we’ll look forward to March 13 now.”
Nicholls meanwhile is considering a tilt at the Grand National with Rocky Creek after he finished a respectable second in the Argento Chase.
Runner-up in the Hennessy Gold Cup at Newbury on his seasonal reappearance, the eight-year-old was a 6-4 favourite to put himself in the Cheltenham Gold Cup picture in Saturday’s recognised trial.
He ultimately came up short, finishing seven lengths in arrears of The Giant Bolster, and Nicholls believes a setback suffered after his Newbury comeback contributed to his defeat.
“Rocky Creek had a bit of a setback after the Hennessy and I think he might have needed the run on Saturday. We’ve not had a clear run with him since Newbury and that might just have found him out,” said the Ditcheat handler.
“I haven’t got any targets in mind for him at the moment, but he will have an entry in the Grand National next week.”
Nicholls is similarly expecting further improvement from Unioniste, who finished third under top-weight in the Sky Bet Chase at Doncaster.
He said: “I just feel the run maybe came a bit quick for Unioniste after his run in the Lexus at Leopardstown over Christmas.
“He’s a horse who seems to be at his best when fresh, so he won’t run for a while now and we’ll look for something in the spring.”
The one major disappointment on a big Saturday for the former champion trainer was Vicenzo Mio, who finished a well-beaten third in Cheltenham’s Triumph Hurdle Trial.
It seems unlikely the four-year-old will now line up in the Triumph Hurdle itself at the Festival in March.
Nicholls said: “My immediate thoughts were that he prefers a flat track and Daryl (Jacob) agreed after the race on Saturday. He ran a similar race on his first run for us at Cheltenham in December. He travelled well and just hasn’t got up the hill.
“He was much better on a flatter track like Kempton and for that reason we might have to draw up a different plan for him, but we’ll see.”
Nicholls ended the day on a high, with Lac Fontana running away with the concluding handicap hurdle.
He said: “He won nicely, but I don’t have any plans for him at this stage. We’ll see how we go, but the race on Saturday is worlds away from a race like the County Hurdle.”