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Intercept (ICPT) Q1 Loss Narrower than Expected, Sales Beat

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Intercept Pharmaceuticals, Inc. (ICPT - Free Report) posted a loss of $3.61 per share in the first quarter of 2017, narrower than the Zacks Consensus Estimate of a loss of $4.27 and also the year-ago loss of $5.17.

Quarterly revenues were $21.1 million, up significantly from $0.4 million in the year-ago quarter and beat the Zacks Consensus Estimate of $15.9 million.

Intercept’s share price movement in the last one year indicates that the stock has underperformed the Zacks classified Medical-Biomedical/Genetics industry. The company’s shares have lost 11.7% during this period, which compares unfavorably with the industry’s 1.2% fall.

Quarter in Detail

Ocaliva recorded $20.6 million sales in the first quarter of 2017. 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 endure UDCA. Sales from international markets were $0.8 million.

Research and development expenses shot up 36.9% year over year to $43.8 million primarily driven by increases in clinical development programs for OCA and infrastructure to support such programs.

General and administrative expenses decreased to $61.1 million from $95.9 million in the year-ago quarter as the year-ago quarter recorded  one-time net expense of $45.0 million attributable to the settlement of a purported securities class action lawsuit.

2017 Outlook Reiterated

Intercept expects operating expenses in the range of $380–$420 million in 2017 to support the continued commercialization of Ocaliva in PBC in the United States and other markets, sustained clinical development for OCA in PBC and NASH and the continued advancement of INT-767 and other pipeline programs.

Pipeline Update

In Dec 2016, the European Commission granted conditional approval to Ocaliva for the treatment of PBC in combination with UDCA in adults.

Meanwhile, Ocaliva is being evaluated for other indications including non-alcoholic steatohepatitis (NASH) and primary sclerosing cholangitis (PSC).

The FDA recently approved a redesign of the phase III trial, REGENERATE on Ocaliva 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 to the earlier target of achieving both.

The sample size of the trial has also been reduced to approximately 750 patients or about 250 patients per arm. The company plans to complete enrolment for the interim analysis cohort in the REGENERATE trial by mid-2017 (data readout in the first half of 2019).

Meanwhile, 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 Ocaliva in combination with statin therapy on lipid metabolism in patients with NASH. Enrollment in the study was completed in the third quarter of 2016, with top-line data expected in mid-2017.

The company also plans to initiate a phase III trial on Ocaliva in NASH patients with cirrhosis in the second half of 2017. The company will also initiate a phase II trial on another candidate, INT-767, in NASH patients with fibrosis in the second half of 2017.

The company also expects top-line results from the phase II trial, AESOP, in primary sclerosing cholangitis (PSC) in the middle of 2017. The company also continues to enroll in its phase IV trial, COBALT, to confirm Ocaliva's clinical benefit on outcomes in PBC.

Our Take

Intercept’s first-quarter results were encouraging as the company reporting a narrower-than-expected loss and beat on revenues. The initial uptake of Ocaliva has been encouraging and sales of the drug should pick up further in 2017.

We remind investors that some other companies like Novartis International (NVS - Free Report) and Gilead Sciences, Inc. (GILD - Free Report) have FXR agonists in phase II or earlier stages of clinical or preclinical development that could be used to treat PBC, NASH and the other liver diseases.

The company does not expect much contribution from international markets in 2017 and most of it will be loaded in the second half as it works to obtain reimbursements in various European countries. However, expenses are expected to continue rising as the company invests in commercial activities related to Ocaliva.

Zacks Rank & Key Pick

Intercept currently carries a Zacks Rank #4 (Sell). A better-ranked stock in the healthcare sector is Infinity Pharmaceuticals, Inc. (INFI - 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.

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