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Is Intercept (ICPT) Poised for a Beat This Earnings Season?

Zacks Equity Research

Intercept Pharmaceuticals, Inc. ICPT is scheduled to report first-quarter 2017 results on May 4, before the market opens.

In the last reported quarter, the company missed expectations by 35.2%. Let’s see how things are shaping up for this announcement.

Intercept’s share price movement in the last six months reveals that the stock underperformed the Zacks classified Medical-Biomedical/Genetics industry. The company’s shares lost 8.1% during this period, which compares unfavorably with the industry’s 7.8% gain.

Surprise History

Intercept’s track record has been mixed so far, with the company surpassing expectations in three of the last four quarters. The company has posted an average negative earnings surprise of 2.06% over this period.

Intercept Pharmaceuticals, Inc. Price and EPS Surprise

Intercept Pharmaceuticals, Inc. Price and EPS Surprise | Intercept Pharmaceuticals, Inc. Quote

Why a Likely Positive Surprise?

Our proven model shows that Intercept is likely to beat estimates this quarter because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +9.13%. This is because the Most Accurate estimate is pegged at a loss of $3.38 while the Zacks Consensus Estimate is pegged at a loss of $4.27. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Intercept currently carries a Zacks Rank #3. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat in the upcoming release.

On the other hand, Sell-rated stocks ( #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Intercept received a major boost with the FDA approval (in May 2016) of its lead drug, Ocaliva, in combination with ursodeoxycholic (UDCA), for the treatment of primary biliary cholangitis (PBC) in adults with an inadequate response to UDCA or as monotherapy in adults unable to bear with UDCA. Ocaliva generated sales of $4.7 million in the last quarter. In Dec 2016, the European Commission also granted conditional approval to Ocaliva for the same indication.

Meanwhile, Ocaliva is being evaluated for other indications including non-alcoholic steatohepatitis (NASH) and primary sclerosing cholangitis (PSC).

Intercept expects operating expenses in the range of $380–$420 million in 2017 to support the continued commercialization of Ocaliva in PBC in the United States and other markets, sustained clinical development for OCA in PBC and NASH and the continued advancement of INT-767 and other pipeline programs. The initial uptake of Ocaliva has been encouraging and sales of the drug should pick up further in 2017.

However, sales in the first quarter will be impacted due to higher gross net impact early in the year while patients navigate through the annual change of insurance carriers and benefits. This in turn can cause patients to have their benefits reauthorized and result in a delay in approval.

We expect investors to remain focused on sales ramp-up of Ocaliva and pipeline updates on Intercept’s first-quarter call. The FDA recently approved a redesign of the phase III trial, REGENERATE on Ocaliva for the safety and efficacy in treating NASH patients with liver fibrosis. The company now needs to achieve only one co primary endpoint- either fibrosis improvement or NASH resolution as compared to the earlier target of achieving both.

The sample size of the trial has also been reduced to approximately 750 patients or about 250 patients per arm. The company plans to complete enrolment for the interim analysis cohort in the REGENERATE trial by mid-2017 (data readout in 2019).

Meanwhile, Intercept also initiated a phase II study, CONTROL (Combination OCA aNd sTatins for monitoRing Of Lipids), on OCA. The study is being conducted to evaluate the effect of OCA in combination with statin therapy on lipid metabolism in patients with NASH. Enrolment in the study was completed in third-quarter 2016, with data expected in 2017.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Gilead Sciences, Inc. GILD has an Earnings ESP of +2.77% and a Zacks Rank #3.The company is scheduled to release results on May 2.  You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Exelixis, Inc. EXEL is +100% and it carries a Zacks Rank #3. The company is expected to release results on May 1.

Fibrogen Inc. FGEN has an Earnings ESP of +23.81% and a Zacks Rank #3. The company is likely to release results on May 8.

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