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Intercept (ICPT) Q3 Loss Narrower than Expected, Sales Miss

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Intercept Pharmaceuticals, Inc. (ICPT - Free Report) posted a loss of $3.59 per share in the third quarter of 2016, narrower than the Zacks Consensus Estimate of a loss of $3.72 but wider than the year-ago loss of $2.10.

Quarterly revenues came in at $5.2 million, up significantly from $0.4 million in the year-ago quarter. Revenues, however, missed the Zacks Consensus Estimate of $5.6 million.

The company’s shares were down almost 17% following the release.

Quarter in Detail

Ocaliva sales came in at $4.7 million in the third quarter of 2016. Note that in May 2016, Ocaliva was approved in the U.S., 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 who are unable to tolerate UDCA.

Research and development expenses shot up 59.3% year over year to $43.8 million primarily due to higher staff and respective expenses as well as higher activities related to the research and development program for Ocaliva.

General and administrative expenses increased 79.8% to $79.8 million driven by the commercial launch of Ocaliva in the U.S., along with increased international infrastructure and pre-commercial activities to support the drug’s anticipated launch in the ex-U.S. markets.

2016 Outlook

Intercept has revised its adjusted operating expense guidance for 2016. The company now expects operating expenses in the range of $320–$340 million (previous guidance: near the low end of the $360–$400 million band). The decrease is primarily due to lower-than-expected development costs, and delayed timing in raw material purchases for R&D manufacturing of Ocaliva.

Pipeline Update

Intercept is currently working on getting Ocaliva approved outside the U.S. A marketing authorisation application (MAA) for Ocaliva is currently under review in the EU. The European Medicines Authority’s (EMA) Committee for Medicinal Products for Human Use (CHMP) has recommended a conditional approval of Ocaliva. A final decision on the approval status should be out by 2016 end. The company expects to launch the product in early 2017.

Moreover, in September, the company filed a New Drug Submission to Health Canada for a marketing approval of Ocaliva, in combination with UDCA, for the treatment of PBC.

Meanwhile, Intercept is evaluating Ocaliva in two phase II studies – CONTROL, for the treatment of nonalcoholic steatohepatitis (NASH) and AESOP, for the treatment of primary sclerosing cholangitis (PSC). Top-line data from both the studies are expected in 2017.

INTERCEPT PHARM Price, Consensus and EPS Surprise


INTERCEPT PHARM Price, Consensus and EPS Surprise | INTERCEPT PHARM Quote

Our Take

Intercept’s third-quarter results were mixed with company reporting a narrower-than-expected loss and revenues missing estimates. Nevertheless, the initial uptake of Ocaliva has been encouraging. A potential approval in Europe around 2016 end should boost Intercept’s portfolio further and enable the company to record its first international sales in 2017.

However, expenses are expected to continue rising as the company invests in commercial activities related to Ocaliva.

Zacks Rank & Key Picks

Intercept currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare sector include Infinity Pharmaceuticals, Inc. (INFI - Free Report) , Geron Corporation and Exelixis, Inc. (EXEL - Free Report) . Both Infinity and Exelixis sport a Zacks Rank #1 (Strong Buy), while Geron carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Infinity’s loss estimates narrowed from $3.84 to $3.79 for 2016 but remained unchanged for 2017 over the last 60 days. The company has posted a positive surprise in all of the four trailing quarters with an average beat of 67.62%.

Exelixis’ loss estimates narrowed from 71 cents to 61 cents for 2016 and from 16 cents to earnings of 4 cents for 2017 over the last 60 days. The company has posted a positive surprise twice in the four trailing quarters with an average beat of 9.1%.

Geron has posted a positive earnings surprise in all of the four trailing quarters with an average beat of 20.78%.

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