A Roller-Coaster Ride With Intercept Pharmaceuticals

2014 has been full of (mainly) ups and (some) downs for Intercept Pharmaceuticals (ICPT).

Jan 19, 2014 at 2:15PM

The share price of Intercept Pharmaceuticals (NASDAQ:ICPT) has been volatile to say the least in the first three weeks of 2014. It started the year at $68 per share, reached a high of $467 (no, that isn't a typo) just 10 days later, and then fell all the way to $248, subsequently recovering to the current price of $292.

So holders of the stock when the clock struck 12 on New Year's Eve saw their investment make gains of 586% in just 10 days, before shares dipped by 47%. However, those same holders are still sitting on overall gains of 329% during 2014. Not a bad start to the year!

But why the drastic share-price movements over just three weeks?

First, let's look at the reason behind the sudden, astronomical gain. Intercept Pharmaceuticals received news that a National Institutes of Health-sponsored clinical trial, which was exploring the effects of a liver disease drug, had been stopped early after patients taking the drug, OCA, had shown a "highly statistically significant improvement" in tests of liver health, compared with a placebo.

Traditionally, such early endings of clinical trials mean the drug really has shown surprisingly positive results, so the gain of 586% in a matter of days is, in one sense, understandable.

However, the news wasn't all positive. The drug also caused worsening cholesterol levels, with so-called "bad cholesterol" levels increasing in patients taking the drug, while levels of so-called "good cholesterol" decreased in the same patients. This is a concern because of the risk of heart disease that higher levels of cholesterol can cause. As a result (and also possibly because of some profit-taking), shares were pushed back somewhat, before making further gains in recent days.

In addition, short sellers may have gotten in on the act, sensing that while the early ending of a clinical trial is positive news, the road to approval is unlikely to be without further problems.

Of course, Intercept Pharmaceuticals isn't the only health-care stock to have experienced encouraging news flow in 2014. Chelsea Therapeutics International (NASDAQ:CHTP) got positive news last week when an FDA advisory panel voted 16-to-1 in favor of its main product candidate, Northera. Although the panel's view is a recommendation only, it's normally the case for the FDA to go with an advisory panel's viewpoint on a drug.

In addition, Johnson & Johnson (NYSE:JNJ), like Intercept Pharmaceuticals, had a clinical trial ended early based on the recommendation of an Independent Data Monitoring Committee, which concluded that the study of ibrutinib showed a significant difference in progression-free survival as compared with the control.

As with Intercept Pharmaceuticals, an early ending of a clinical trial is positive news. However, because of the size, scale, and diversity of Johnson & Johnson, the impact on its share price was somewhat less dramatic than it was for Intercept Pharmaceuticals!

Indeed, while investors in Intercept Pharmaceuticals may feel slight disappointment at the fall in share price from its high of $467, a three-week gain of 329% isn't a bad way to start 2014.

All eyes will be on further updates from the biotech stock. This could prove to be a rather exciting year for the company -- and for its shareholders.

2014 could be an exciting year for this stock, too
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Fool contributor Peter Stephens has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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