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Intercept (ICPT) Likely to Beat in Q2 Earnings: Stock to Gain?
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Intercept Pharmaceuticals, Inc. is scheduled to report second-quarter 2016 results on Aug 4.
Intercept has a mixed track record so far, with the company missing estimates in two of the last four quarters. However, it has posted an average positive earnings surprise of 2.36% over the last four quarters. Let’s see how things are shaping up for this announcement.
Factors at Play
In May 2016, Intercept’s lead drug, Ocaliva, was granted accelerated approval in the U.S., in combination with UDCA, for the treatment of primary biliary cholangitis (PBC) – previously known as primary biliary cirrhosis – in adults with inadequate response to UDCA or as monotherapy in adults who are intolerant to UDCA. The FDA has approved Ocaliva under its accelerated approval program based on a reduction in alkaline phosphatase (ALP), since an improvement in survival or disease-related symptoms has not been established yet. Continued approval in this indication may be contingent upon the verification and description of clinical benefit in confirmatory studies.
As such, the company will not record any sales in the second quarter of 2016 as it takes several weeks from the first prescription written to reimbursement and sales prescriptions. As a result, the company continues to work on the reimbursement front for Ocaliva.
Additionally, a marketing authorisation application for Ocaliva for the treatment of PBC was accepted by the European Medicines Authority (EMA) in Jun 2015 and is currently under review. A decision is expected in late 2016.
Meanwhile, Intercept is evaluating Ocaliva for other indications including nonalcoholic steatohepatitis (NASH) and Primary Sclerosing Cholangitis (PSC). The company initiated a phase III study (REGENERATE) on Ocaliva for the treatment of non-cirrhotic NASH in patients with advanced liver fibrosis. Enrolment is currently ongoing and the company expects the study to be fully enrolled by the first half of 2017.
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 is expected to be completed by 2016 end. A phase II study (CARE) on OCA for biliary atresia in pediatric patients and a double-blind phase II study (AESOP) for PSC are ongoing. Enrolment in the AESOP study for the PSC indication is expected to be complete by 2016 end. The company is currently planning additional NASH studies, including a NASH cirrhosis study and a non-invasive technology study.
For 2016, Intercept projects operating expenses in the range of $360–$400 million (higher in the second half of the year than the first half), much higher than the 2015 level. The increase will primarily be due to the clinical development program on Ocaliva in NASH and PSC, higher Ocaliva manufacturing activities, and continuation of the development of INT-767 and other preclinical programs.
Our proven model shows that Intercept is likely to beat estimates this quarter because it has the right combination of two key ingredients. 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 estimates, and Intercept has the right mix.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +5.05%. This is because the Most Accurate Estimate stands at a loss of $3.57, while the current Zacks Consensus Estimate is pegged at a loss of $3.76.
Zacks Rank: Intercept carries a Zacks Rank #3, which when combined with its positive ESP, makes us reasonably confident of a positive surprise this quarter.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks That Warrant a Look
Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Mylan, Inc. has an Earnings ESP of +1.75% and a Zacks Rank #2. The company is expected to release second-quarter results on Aug 9.
Impax Laboratories Inc. has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is expected to release second-quarter results on Aug 9.
Ironwood Pharmaceuticals (IRWD - Free Report) has an Earnings ESP of +13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.
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Intercept (ICPT) Likely to Beat in Q2 Earnings: Stock to Gain?
Intercept Pharmaceuticals, Inc. is scheduled to report second-quarter 2016 results on Aug 4.
Intercept has a mixed track record so far, with the company missing estimates in two of the last four quarters. However, it has posted an average positive earnings surprise of 2.36% over the last four quarters. Let’s see how things are shaping up for this announcement.
Factors at Play
In May 2016, Intercept’s lead drug, Ocaliva, was granted accelerated approval in the U.S., in combination with UDCA, for the treatment of primary biliary cholangitis (PBC) – previously known as primary biliary cirrhosis – in adults with inadequate response to UDCA or as monotherapy in adults who are intolerant to UDCA. The FDA has approved Ocaliva under its accelerated approval program based on a reduction in alkaline phosphatase (ALP), since an improvement in survival or disease-related symptoms has not been established yet. Continued approval in this indication may be contingent upon the verification and description of clinical benefit in confirmatory studies.
As such, the company will not record any sales in the second quarter of 2016 as it takes several weeks from the first prescription written to reimbursement and sales prescriptions. As a result, the company continues to work on the reimbursement front for Ocaliva.
Additionally, a marketing authorisation application for Ocaliva for the treatment of PBC was accepted by the European Medicines Authority (EMA) in Jun 2015 and is currently under review. A decision is expected in late 2016.
Meanwhile, Intercept is evaluating Ocaliva for other indications including nonalcoholic steatohepatitis (NASH) and Primary Sclerosing Cholangitis (PSC). The company initiated a phase III study (REGENERATE) on Ocaliva for the treatment of non-cirrhotic NASH in patients with advanced liver fibrosis. Enrolment is currently ongoing and the company expects the study to be fully enrolled by the first half of 2017.
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 is expected to be completed by 2016 end. A phase II study (CARE) on OCA for biliary atresia in pediatric patients and a double-blind phase II study (AESOP) for PSC are ongoing. Enrolment in the AESOP study for the PSC indication is expected to be complete by 2016 end. The company is currently planning additional NASH studies, including a NASH cirrhosis study and a non-invasive technology study.
For 2016, Intercept projects operating expenses in the range of $360–$400 million (higher in the second half of the year than the first half), much higher than the 2015 level. The increase will primarily be due to the clinical development program on Ocaliva in NASH and PSC, higher Ocaliva manufacturing activities, and continuation of the development of INT-767 and other preclinical programs.
INTERCEPT PHARM Price and EPS Surprise
INTERCEPT PHARM Price and EPS Surprise | INTERCEPT PHARM Quote
What Our Model Indicates
Our proven model shows that Intercept is likely to beat estimates this quarter because it has the right combination of two key ingredients. 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 estimates, and Intercept has the right mix.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +5.05%. This is because the Most Accurate Estimate stands at a loss of $3.57, while the current Zacks Consensus Estimate is pegged at a loss of $3.76.
Zacks Rank: Intercept carries a Zacks Rank #3, which when combined with its positive ESP, makes us reasonably confident of a positive surprise this quarter.
Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks That Warrant a Look
Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Mylan, Inc. has an Earnings ESP of +1.75% and a Zacks Rank #2. The company is expected to release second-quarter results on Aug 9.
Impax Laboratories Inc. has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is expected to release second-quarter results on Aug 9.
Ironwood Pharmaceuticals (IRWD - Free Report) has an Earnings ESP of +13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>