Why Intercept Pharmaceuticals, Inc. Shares Imploded

Intercept Pharmaceuticals dives $129 following comments from its CEO.

Jan 14, 2014 at 2:05PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Intercept Pharmaceuticals (NASDAQ:ICPT), a biopharmaceutical company developing therapies to treat chronic liver diseases, fell as much as 36%, or $129 per share – it's fourth consecutive intraday move of at least $129 -- following comments made by its CEO called into question the future of its lead drug, obeticholic acid (OCA) for nonalcoholic steathohepatitis (NASH).

So what: Following Intercept's presentation at the JPMorgan Healthcare Conference yesterday, CEO Mark Pruzanski noted that his company may need the assistance of a larger drug maker (i.e., a partner) to help bring OCA to market. This only further complicates what has been a boom-and-bust past week for Intercept which exploded higher by more than 500% at the end of last week following the stoppage of a mid-stage trial for OCA on statistically significant efficacy. Intercept, however, has been slowed by a flat tire this week as cholesterol levels in those patients, specifically the bad kind, saw a marked increase and will need further investigating.

Now what: And I thought the five-day chart made me dizzy yesterday -- you should see it now! There are really a handful of variables at play here includes the safety of OCA as it relates to the increase in lipid levels, the efficacy as it relates to a largely unmet disease that could affect between 5 million and 6 million people in the U.S., and Intercept's need to have a larger pharmaceutical partner share development costs as well as handle an eventual commercial rollout if the drug is approved. In other words, with the share price having moved a minimum of $129 in each of the past four days, your best course of action is likely to stick to the sidelines and to let things settle down first.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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