Intercept Pharmaceuticals Inc: Even More Growth to Come?

A Foolish look at the top performing healthcare stock in 2014.

Mar 10, 2014 at 5:00PM

One of the biggest stories in the biotech space has undoubtedly been Intercept Pharmaceuticals' (NASDAQ:ICPT) sudden, explosive rise following a mid-stage trial for its experimental Non-Alcoholic Steatohepatitis (NASH) therapy called obeticholic acid (OCA). As a refresher, OCA showed such a strong clinical benefit to patients receiving the drug, compared to a placebo, that the trial was stopped early after an interim analysis last January. Basically, it would have been unethical to continue dosing patients with a placebo when the therapy was clearly working.

On the back of this news, Intercept shares shot up over 500% in two days, giving the stock an astronomical 900% gain over the past twelve months alone. So, it's reasonable to wonder if Intercept can continue this upward trend, or if it's time to take profits.

ICPT 1 Year Price Returns Chart

Source: YCharts.

NASH & OCA
Recent studies estimate that more than 30 million adults in the U.S. are afflicted with NASH, and there is no approved treatment. Within this subpopulation, 21% to 26% are projected to develop liver cirrhosis, many of whom will eventually require transplants. NASH patients are also much more likely to develop Type II diabetes and chronic weight problems. So, it's safe to say that OCA is targeting a large unmet medical need.

OCA is a close analog to a natural bile acid CDCA that is a potent farnesoid X receptor, or FXR, agonist. Put simply, Intercept's researchers have chemically modified CDCA by adding a 6-α ethyl substitution to form OCA. The result is that OCA is 100 times more potent as a FXR agonist than natural CDCA.

What does this biochemical wizardry amount to in layman's terms? The FXR pathway is key in terms of reducing liver fibrosis, inflammation, improving fat metabolism, among many other biologically important functions. So, the basic idea underlying OCA is to stimulate this complex biochemical pathway in a manner that benefits patients with NASH, as well as other liver diseases. And OCA appears to be a powerful tool to achieve this goal.

Market opportunity for NASH
OCA's market opportunity as a treatment for NASH is a bit fuzzy because the disease remains poorly diagnosed. Although about 12% of U.S. adults are suspected to suffer from NASH, only 2% to 3% actually get diagnosed with the disease.

Even if OCA ends up being used in only the sickest patients, or 0.3% to 0.9% of diagnosed NASH patients, analysts are still projecting peak sales of between $2.7 billion to $3.6 billion per year. So, if our ability to diagnosis NASH improves, all bets could be off. Put simply, OCA has the potential to become one of the top-selling drugs of all time, if NASH can be diagnosed without having to resort to a liver biopsy.

Additional value drivers in Intercept's pipeline
Oddly enough, the few analysts that were watching this stock weren't doing so because of the NASH trial. Most were focused on OCA's late-stage trial for primary biliary cirrhosis, or PBC, the drug's lead indication. OCA is currently being tested as a second-line treatment for PBC, with analysts suggestions that peak sales could top $850 million for this indication.

Although this trial is expected to readout in the first half of this year, the path to Food and Drug Administration, or FDA, approval is not yet clear. Specifically, the FDA may require another late-stage confirmatory study prior to approval, whereas Intercept aims to file for accelerated approval, enabling the confirmatory study to essentially become a post-marketing requirement. Looking ahead, Intercept is expected to initiate four additional clinical trials for OCA later this year. In sum, Intercept has a lot more to offer than a single upside surprise from its NASH studies.

Foolish wrap up
When considering OCA as a treatment for NASH, the drug looks to be one of this year's top clinical breakthroughs. Although participants in the study receiving OCA experienced higher levels of "bad" LDL cholesterol, I believe this side-effect is minor in comparison to the drug's benefits. And given the large peak sales projections for an effective NASH treatment, it's no wonder that a plethora of companies like Gilead Sciences, Novo Nordisk, Raptor Pharmaceuticals, among many others, are racing to develop their own treatments. However, despite this potential competition, I think Intercept still has more room to run.

This stock may outperform even Intercept Pharmaceuticals this year.
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

George Budwell owns shares of Gilead Sciences. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers