Why Is Intercept (ICPT) Down 30.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Intercept Pharmaceuticals (ICPT). Shares have lost about 30.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Intercept due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Intercept Q4 Earnings Miss, Revenues Beat Estimates

Intercept incurred a loss of $2.99 per share in fourth-quarter 2019, wider than the Zacks Consensus Estimate of $2.56 and also the year-ago loss of $2.97.

However, total revenues of $71.5 million in the quarter beat the Zacks Consensus Estimate of $69 million. Revenues also surged 34.1% year over year, primarily owing to high sales of the lead drug Ocaliva.

Quarter in Detail

Ocaliva (obeticholic acid or OCA) reported $70.3 million in sales, up from $52.9 million in the year-earlier quarter. Net sales in the United States came in at $53.5 million while ex-U.S. Ocaliva net sales summed $16.8 million.

Research and development expenses increased 2.1% year over year to $64.6 million, primarily driven by higher nonalcoholic steatohepatitis (NASH) development program expenses and costs associated with the preparation of the new drug application (NDA) submission.

Selling, general and administrative expenses were $93.7 million, up 31.9% year over year due to higher expenses in launch preparation activities related to OCA for the potential treatment of liver fibrosis due to NASH.

As of Dec 31, 2019, Intercept had cash, cash equivalents, restricted cash and marketable securities of $657.4 million compared with $712.4 million as of Sep 30, 2019.

Full-Year Results

For 2019, Intercept’s revenues of $252 million were up 40.2% year over year. Ocaliva recorded sales of $249.6 million in 2019, reflecting an increase of 40% year over year

Loss per share was $10.89 in 2019 compared with the loss of $10.86 in 2018.

Other Updates

Along with the earnings release, Intercept announced that the FDA has now set an action date of Jun 26, 2020, for completing the review of the NDA seeking approval of OCA for liver fibrosis due to NASH. The extension resulting in an approval delay disappointed investors.

Earlier, the regulatory agency set an action date of Mar 26, 2020 for the NDA. In November 2019, the FDA accepted and granted priority review to Intercept’s NDA for OCA seeking accelerated approval for the treatment of fibrosis due to NASH.

The FDA is planning to hold an Advisory committee meeting (ADCOM) with a tentative date set for Apr 22, 2020, in relation with the NDA for OCA to treat liver fibrosis due to NASH.

In December 2019, the marketing application for OCA was submitted to the European Medicines Agency (EMA) for treating fibrosis due to NASH. On the fourth-quarter conference call, management stated that on approval, a potential launch of OCA is expected in the first half of 2021 in Europe.

Meanwhile, last month, Intercept completed patient enrollment in the phase III REVERSE study, which is currently evaluating OCA for the treatment of compensated cirrhosis due to NASH. This double-blind, placebo-controlled study is examining the safety and efficacy of OCA in the given patient population.

We remind investors that OCA is already approved under the brand name Ocaliva for treating primary biliary cholangitis (PBC) in combination with ursodeoxycholic acid (UDCA) in adults with an inadequate response to UDCA or as a monotherapy for adults intolerant to UDCA.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.56% due to these changes.

VGM Scores

Currently, Intercept has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Intercept has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.