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

Intercept Pharmaceuticals, Inc. ICPT posted a loss of $3.33 per share in the first quarter of 2016, narrower than the Zacks Consensus Estimate of a loss of $3.58 but wider than the year-ago loss of $1.78.

The company generated licensing revenues of $445,000, down significantly from $1.4 million in the year-ago quarter and even below the Zacks Consensus Estimate of $490,000.

Quarter in Detail

Intercept is currently seeking FDA approval for its lead candidate, Ocaliva (obeticholic acid), for primary biliary cholangitis (PBC).

Research and development expenses shot up 87.4% year over year to $37.4 million primarily due to additional personnel for the development team to manage increased activities related to the Ocaliva development program and higher manufacturing activities.

General and administrative expenses jumped to $90.4 million from $13.1 million in the year-ago quarter owing to an increase in pre-commercial activities in both the U.S. and internationally.

2016 Outlook

Intercept expects operating expenses in the range of $360–$400 million (higher in the second half than the first half), much higher than the 2015 level. The increase will primarily support the clinical development program of Ocaliva in PBC, nonalcoholic steatohepatitis (NASH) and primary sclerosing cholangitis (PSC) (phase II), higher OCA manufacturing activities, and continuation of the development of INT-767 and other preclinical programs.

Pipeline Update

In Dec 2015, the FDA extended the PDUFA date for priority review of Ocaliva in the treatment of PBC by three months to May 29. The FDA asked for additional clinical data analyses, which Intercept has already submitted.

Last month, the FDA’s Gastrointestinal Drugs Advisory Committee voted unanimously (in the ratio of 17 to 0) in favor of the company’s lead pipeline candidate, Ocaliva. The committee recommended accelerated approval of the candidate for PBC.

Although the FDA is not bound to abide by the Advisory Committee's recommendation, it generally takes the same into consideration while reviewing candidates. The candidate is also under review in the EU and a decision is expected in late 2016 (first sales in 2017).

Apart from PBC, OCA is being evaluated for a variety of chronic liver diseases including NASH and PSC. OCA is currently in a phase III study (REGENERATE) in NASH patients with advanced liver fibrosis. Enrolment in the trial is expected to be complete by the first half of 2017. The candidate is also in a phase II trial, CONTROL, which will evaluate its effect, in combination with statin therapy, on lipid metabolism in patients with NASH. Enrolment in the trial is expected to be completed by 2016 end. Apart from these, the company initiated a phase I study on INT-767 in Nov 2015, which is expected to be complete this year.

Our Take

Intercept’s narrower-than-expected loss in the first quarter of 2016 was encouraging. We expect investor focus on the important upcoming regulatory event (the PDUFA date for Ocaliva in PBC) in May 2016. A potential approval of Ocaliva for PBC will be a big boost for the company as it plans a launch in Jun 2016 and may record its first revenue later this year.

Intercept currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Shire plc SHPG, Biodel, Inc. BIOD and Nektar Therapeutics NKTR.  All these stocks carry a Zacks Rank #2 (Buy).

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