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Intercept (ICPT) Up on Q4 Revenue Beat, NASH Study in Focus

Zacks Equity Research

Shares of Intercept Pharmaceuticals, Inc. ICPT gained 7.5% after the company posted mixed results for the fourth quarter of 2018 wherein even though earnings missed estimates, revenues beat the same.

Investors are upbeat about the company’s increase in Ocaliva sales and landmark results from its REGENERATE study, which were reported earlier. 

Notably, Intercept’s stock has surged 8.7% in the past six months.

Intercept Pharmaceuticals, Inc. Price, Consensus and EPS Surprise


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

The company incurred a loss of $2.97 per share in the fourth quarter, wider than the Zacks Consensus Estimate of a loss of $2.42 but narrower than the year-ago loss of $4.43.

Quarterly revenues were $53.3 million, up from $37.7 million in the year-ago quarter. Revenues also surpassed the Zacks Consensus Estimate of $51.7 million.

Quarter in Detail

Ocaliva recorded $52.9 million of sales, up from $46.6 million recorded in the third quarter of 2018 and $37.3 million in the year-earlier period. Net sales in the United States came in at $41.1 million while the ex-U.S. Ocaliva net sales summed $11.8 million.

Ocaliva in combination with ursodeoxycholic (UDCA) was approved in the United States during 2016 for the treatment of primary biliary cholangitis (“PBC”) in adults with an inadequate response to UDCA or as monotherapy in adults, who are unable to endure UDCA. The drug was also granted a conditional approval by the European Commission. In February 2018, Ocaliva’s label was updated in the United States to include a boxed warning and a dosing table that reinforced the existing dosing schedule in PBC patients with Child-Pugh Class B or C or decompensated cirrhosis.

Research and development expenses increased 10.1% year over year to $63.3 million, primarily driven by more clinical development programs for Ocaliva. However, selling, general and administrative expenses decreased 15.8% to $71 million.

2019 Outlook

Ocaliva’s net sales are expected between $225 million and $240 million in 2019. Intercept continues to expect operating expenses to be $450-$470 million in 2019.

Pipeline Update

Obeticholic acid (OCA) is also being evaluated for other indications including non-alcoholic steatohepatitis (“NASH”) and primary sclerosing cholangitis (“PSC”).

Earlier in 2019, Intercept announced positive top-line results from its pivotal phase III REGENERATE study of OCA on patients with liver fibrosis due to NASH.  The company stated that the primary endpoint of the study — fibrosis improvement without worsening of NASH at 18 months — was achieved with the 25 mg daily dose of OCA.

Also, a numerically greater proportion of patients in both OCA treatment arms (taking doses of 10 mg and 25 mg) met the primary endpoint of NASH resolution with no deterioration of liver fibrosis as compared to placebo. However, this did not reach statistical significance. Nevertheless, the study was required to attain one of the two primary goals per the FDA which it did.

Intercept plans to file for an approval of OCA as a NASH treatment both in the United States and in Europe during the second half of 2019. The company will also release data from the REGENERATE analysis at the European Association for the Study of the Liver (EASL) conference in April.

The REVERSE study is designed to evaluate the efficacy and safety of Ocaliva on NASH patients suffering compensated cirrhosis. The probe is currently enrolling patients, which is expected to be complete by the end of 2019.

Our Take

Intercept’s fourth-quarter results were mixed as earnings lagged expectations but sales beat the mark. Management’s efforts to increase awareness about the label update in 2018 and expansion in sales force across the United States thereafter, is reaping results. Solid growth in new patient enrollment is likely to drive stronger sales in 2019.

Moreover, the favorable outcomes from the REGENERATE assessment are a big boost to Intercept. This news significantly buoyed investor sentiments given the market potential of NASH and the fact that biotech bigwig Gilead Sciences, Inc. GILD announced the failure of a late-stage study on selonsertib, involving patients afflicted with compensated cirrhosis (F4) due to NASH. This in turn, puts Intercept ahead in the race to get a drug approved for NASH.

The market for NASH is expected to be one of the target areas in 2019 by most large pharma/biotech companies. This market is poised to witness rapid growth unlike other lucrative yet saturated markets like cancer. With no treatments currently approved to address this disease, the market opportunity is substantially huge. In fact, many companies are investing a major chunk of the respective R&D spends in the same.

Madrigal Pharmaceuticals, Inc. MDGL and Viking Therapeutics, Inc. too have promising NASH candidates in the respective pipelines. Pharma giant Merck MRK recently exercised its option to license NGM313, an investigational monoclonal antibody agonist of the β-Klotho/FGFR1c receptor complex that is currently being evaluated for the treatment of NASH and type 2 diabetes.

Hence, we expect investors to focus on further updates from the NASH program. A tentative approval will be significant for Intercept.

Zacks Rank

Intercept currently carries a Zacks Rank #4 (Sell).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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