Will Ocaliva Sales Dampen Intercept's (ICPT) Q4 Earnings?

Intercept Pharmaceuticals, Inc. ICPT is scheduled to report fourth-quarter 2017 results on Feb 14, before the opening bell.

Last quarter, the company reported a narrower-than-expected loss. Let’s see how things are shaping up for this announcement.

 

 

Intercept’s stock has declined 48.3% in the last six months compared with the industry’s decline of 5.8%.  In particular, the company’s shares have plunged significantly due to safety issues regarding the approved drug Ocaliva.

Surprise History

Intercept’s track record is pretty mixed, with the company reporting a narrower-than-expected loss in three of the last four quarters and wider-than-anticipated loss in one. The company delivered an average positive earnings surprise of 0.82% over this period.

Intercept Pharmaceuticals, Inc. Price and EPS Surprise

 

Intercept Pharmaceuticals, Inc. Price and EPS Surprise | Intercept Pharmaceuticals, Inc. Quote

 

Factors at Play

Intercept received a major boost with the FDA’s approval (in May 2016) of its lead drug, Ocaliva, 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 unable to bear with UDCA. In December 2016, the European Commission also granted conditional approval to Ocaliva for the same indication.

The initial uptake of Ocaliva has been encouraging. However, there has been a lot of debates regarding the drug’s safety. Prescription demand softened following the Dear Health Care Provider letter and the FDA safety communication on Ocaliva.

Some deaths have been reported in PBC patients with moderate or severe hepatic impairment (Child Pugh B or C cirrhosis). The FDA reported 19 deaths due to Ocaliva and stated that the drug may also affect the liver. However, Intercept conducted an analysis and concluded that these patients were prescribed once daily doses of Ocaliva, which is seven times higher than the recommended weekly dose. The analysis was conducted in consultation with the FDA. The company concluded that deaths occurred due to overdosing. Consequently, Intercept issued the Dear Healthcare Provider letter. Thereafter, the FDA issued their own safety communication to reinforce recommended label dosing.

Thus, such side effects are expected to limit the sales potential.

Meanwhile, Ocaliva is being evaluated for other indications including non-alcoholic 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 for the interim analysis cohort in the REGENERATE trial was completed.

Meanwhile, Intercept announced trial results from two phase II trials — CONTROL (Combination OCA aNdsTatins for monitoRing Of Lipids) and AESOP for PSC. CONTROL study is being conducted to evaluate the effect of Ocaliva in combination with statin therapy on lipid metabolism in patients with NASH.  Results from AESOP revealed that OCA met the primary endpoint of statistically significant reduction in alkaline phosphatase (ALP) while results from CONTROL showed that the company achieved its objective in demonstrating that the lowest available dose of atorvastatin rapidly reverses OCA associated LDL changes to below baseline levels in NASH patients with fibrosis or cirrhosis.

Intercept expects operating expenses to be in the middle of the earlier projected range of $380-$420 million in 2017. The company believes that continued commercialization of Ocaliva in PBC in the United States and other markets.  In order to streamline operating expenses, Intercept decided to deprioritize its INT-767 development program.

We expect investors to remain focused on sales ramp up of Ocaliva and pipeline updates during the fourth-quarter earnings call.

Earnings Whispers

Our proven model doesn’t conclusively show that Intercept is likely to beat estimates this quarter. This is because 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 earnings. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.11%. This is because the Most Accurate estimate is pegged at a loss of $3.61 while the Zacks Consensus Estimate is pegged at a loss of $3.57. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Intercept currently carries a Zacks Rank #3 which when combined with a negative ESP makes surprise prediction difficult.

Note that, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Exelixis EXEL, which is expected to release fourth-quarter results on Feb 26, has an Earnings ESP of +10.64% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Anthera Pharma ANTH is expected to release fourth-quarter results on Feb 26. The company has an Earnings ESP of +20.47% and a Zacks Rank #3.

Alkermes ALKS is scheduled to release fourth-quarter results on Feb 21. The company has an Earnings ESP of +3.53% and a Zacks Rank #3.

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