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Intercept Pharmaceuticals (ICPT) Surges on Acquisition Deal

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Shares of Intercept Pharmaceuticals, Inc. soared 79.2% after Italy-based pharmaceutical company Alfasigma S.p.A. announced an agreement to acquire Intercept for $19.00 per share in cash.

The purchase price of $19 represented a premium of 82% to Intercept’s closing stock price on Sep 25, 2023. Investors cheered the premium offer and shares surged on the same.

The transaction is expected to close by the end of the year.

Intercept’s lead drug, Ocaliva (obeticholic acid or OCA), a farnesoid X receptor agonist, is approved in the United States and several other jurisdictions for the treatment of primary biliary cholangitis (PBC) in combination with ursodeoxycholic acid (UDCA) in adults with an inadequate response to UDCA or as monotherapy in adults intolerant to UDCA.

Ocaliva is the only FDA-approved second-line therapy for PBC. Sales of the drug came in at $152 million in the first half of 2023.

Intercept is also evaluating a fixed-dose combination of obeticholic acid and bezafibrate in phase II trials for PBC.

Intercept’s shares have surged 51.2% in the year so far against the industry’s 15.9% decline.

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The acquisition news came in troubled times for Intercept, which earlier shelved plans for its nonalcoholic steatohepatitis (NASH) treatment.

The decision came after the FDA issued a complete response letter (CRL) to its new drug application seeking approval for OCA for treating pre-cirrhotic fibrosis due to NASH.

Consequently, Intercept decided to discontinue all NASH-related investments and immediately began the process of closing out the REGENERATE study.

The company also decided to cut one-third of its workforce to reduce operating expenses. Intercept planned to initiate workforce reductions in the third quarter of 2023, with a vast majority to be completed by 2023-end.

The CRL was disappointing for Intercept, as it only had Ocaliva to bank on for its growth. The successful development of OCA for NASH would have been a significant boost for the company. The NASH market holds potential but is quite challenging with no approved therapies.

Hence, the decision to merge with Alfasigma should help Intercept wade through these times better and market Ocaliva.

Pharma/biotech bigwigs are constantly on the lookout to bolster portfolios through acquisitions to diversify revenue bases in the face of dwindling sales of high-profile drugs. M&A is back in the spotlight in 2023 after a lull.

Swiss pharma giant Novartis (NVS - Free Report) recently acquired Chinook Therapeutics and added two late-stage treatments in development for rare, severe chronic kidney diseases. The acquisition added atrasentan and zigakibart (BION-1301) for immunoglobulin A nephropathy to Novartis’ pipeline.

Biogen (BIIB - Free Report) recently acquired Reata Pharmaceuticals, Inc. for $7.3 billion. The acquisition added Reata Pharmaceuticals’ lead asset, Skyclarys and other clinical and preclinical pipeline programs to Biogen’s portfolio/pipeline. Skyclarys was approved for the treatment of Friedreich’s ataxia, a rare neuromuscular disorder, in the United States earlier this year.

Biogen expects significant synergies from the acquisition with its existing rare disease portfolio and will update its guidance when it reports its third-quarter 2023 earnings release.

Zacks Rank and a Stock to Consider

Intercept currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the biotech industry is Eton Pharmaceuticals (ETON - Free Report) , which currently sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Loss estimates for Eton for 2023 have narrowed to 10 cents from 31 cents in the past 60 days, while earnings estimates for 2024 are pegged at 26 cents per share.

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