EUR 850.00 For Business Accounts Only

Morningstar | Intercept's Ocaliva Sales Slightly Higher Than Expected in 1Q, but All Eyes on Upcoming NASH Filing

There were no major surprises in Intercept's first-quarter results, and we are maintaining our fair value estimate of $150 per share, which is driven by the company's potential in nonalcoholic steatohepatitis, or NASH. The no-moat emerging biotech reported $51.8 million in net sales for Ocaliva, its only marketed product, for primary biliary cholangitis. This was slightly higher than our expectations, so we've revised our full-year estimates for Ocaliva to $239 million, which is within management's raised revenue guidance. This upward adjustment was offset by our increase to full-year operating expenses. Both selling, general, and administrative costs as well as research and development costs were higher than we expected due to preparations for the upcoming OCA filing and potential launch. Management revised its earnings guidance to increase full-year adjusted operating spend to $485 million at the midpoint.

The company recently announced results for its phase 3 trial of OCA for patients with liver fibrosis due to NASH. The results from the trial largely confirmed our previous thoughts on the opportunity: while efficacy will likely bring OCA across the finish line of approval, its side effects leave room for competition down the road. Further, we continue to believe that the multi-billion-dollar NASH market opportunity is large enough and segmented enough to support several therapies. Given that OCA is the most advanced candidate in the NASH pipeline, we think it is likely that Intercept is first to market in 2020. We currently weight the fibrosis opportunity with a 65% probability of approval.