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What's in Store for Intercept (ICPT) This Earnings Season?

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Intercept Pharmaceuticals, Inc. is scheduled to report second-quarter 2018 results on Aug 2.

Intercept’s stock has gained 52.2% in the year so far compared with the industry’s decline of 5.0%.

 

Surprise History

In the last reported quarter, the company incurred a narrower-than-expected loss. Intercept’s earnings track record is decent so far. Over the last four quarters, the company’s earnings surpassed expectations thrice. Nevertheless, Intercept delivered an average positive earnings surprise of 1.12% in the said time frame.

Let’s see how things are shaping up for this announcement.

Intercept Pharmaceuticals, Inc. Price, Consensus and EPS Surprise

 

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

 

Factors in Play

The primary source of revenues for Intercept is Ocaliva’s sales. We note that Intercept received a major boost with the FDA’s 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. In December 2016, the European Commission also granted conditional approval to Ocaliva for the same indication.

The initial uptake of Ocaliva was encouraging. However, prescription demand has softened following the Dear Health Care Provider letter and the FDA safety communication on Ocaliva. Some deaths in PBC patients with moderate or severe hepatic impairment (Child Pugh B or C cirrhosis) were reported. However, Intercept conducted an analysis and concluded that these patients were prescribed once-daily doses of Ocaliva, which is seven times higher than the recommended weekly dose.

The analysis was conducted in consultation with the FDA. The company concluded that deaths occurred due to overdosing. Consequently, Intercept issued the Dear Healthcare Provider letter. Thereafter, the FDA issued their own safety communication to reinforce recommended label dosing.

The company also announced an updated label for Ocaliva in the United States, reinforcing appropriate dosing in PBC patients with Child-P Class B or C or decompensated cirrhosis.

While the updated label should help the stock turn around, it might take a while before the sales start to recover.

Ocaliva’s net sales are expected between $170 million and $185 million in 2018. Intercept continues to expect operating expenses in the range of $390-$410 million.

Investors’ primary focus will be on Ocaliva’s performance on the call along with other pipeline developments.  Ocaliva is being evaluated for other indications, including non-alcoholic steatohepatitis (“NASH”) and primary sclerosing cholangitis (“PSC”). The FDA had earlier approved a redesign of the phase III trial, REGENERATE, on OCA 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 with the earlier target of achieving both. Enrollment of the interim analysis cohort was completed in the trial and results are expected in the first half of 2019.

Earlier, Intercept initiated a phase III trial, REVERSE, on OCA. The randomized phase III study will evaluate the efficacy and safety of OCA, in subjects with compensated cirrhosis due to NASH in approximately 540 patients with a biopsy-confirmed diagnosis of cirrhosis. The trial is currently enrolling. 

Earnings Whispers

Our proven model doesn’t show that Intercept is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat earnings. That is not the case here as you will see below.

Earnings ESP: Earnings ESP for Intercept is -0.59%.  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 #2. Even though the rank is favourable, the company’s negative ESP makes surprise prediction difficult.

Note that, Sell-rated stocks (#4 or 5) going into an earnings announcement are best avoided, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are few companies that you may want to consider, as our model shows that it has the right combination of elements to deliver a beat this quarter.

Pacira Pharmaceuticals, Inc. (PCRX - Free Report) has an Earnings ESP of +42.86% and currently carries a Zacks Rank #2. The company is scheduled to release second-quarter results on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Endocyte, Inc. has an Earnings ESP of +21.05% and currently carries a Zacks Rank #2. The company is scheduled to release second-quarter results on Jul 31.

Jazz Pharmaceuticals Plc (JAZZ - Free Report) has an Earnings ESP of +1.43% and currently carries a Zacks Rank #3. The company is scheduled release second-quarter results on Aug 7.

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