EUR 850.00 For Business Accounts Only

Morningstar | ICPT Updated Forecasts and Estimates from 19 Mar 2019

Intercept reported fourth-quarter product sales of about $53 million, slightly above our expectations and representing 42% growth from last year. While quarterly sales growth was lumpy this year, full-year sales of $178 million were up 38% from last year, within our expectations and management guidance. The company reported a net loss of $88 million for the quarter and $309 million for the full year, an improvement from $111 million and $360 million last year. We don't anticipate any material changes to our fair value estimate of $150 per share, and we're maintaining our no-moat rating, given that the firm's prospects largely rest on one drug with a questionable side effect profile.

These fourth-quarter results closely follow last week's announcement of positive top-line results from the phase 3 trial of obeticholic acid, or OCA, in patients with liver fibrosis due to nonalcoholic steatohepatitis, NASH. Share prices swung on the results, initially climbing on the positive news and later plunging on liver-related safety concerns. However, the liver-related serious side effects reported last week were minimal and largely consistent with previous studies, and management reaffirmed this on the earnings call. We maintain our long-term thesis for Intercept, which is that OCA offers efficacy that could give the firm first-mover status if approved, but the safety profile leaves room for competitors. We continue to model a 65% probability of approval in patients with liver fibrosis due to NASH, as well as declining market share as potential competitors with more attractive safety profiles enter the market. With this dynamic explicitly modeled, we still see upside potential, given current share prices.