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Here's Why Intercept Pharmaceuticals Jumped 22.7% in August

By Brian Orelli, PhD - Sep 11, 2018 at 5:14PM

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Its Ocaliva is selling well enough as investors wait for more clinical trial data next year.

What happened

Shares of Intercept Pharmaceuticals ( ICPT 7.44% ) jumped 22.7% in August, according to data provided by S&P Global Market Intelligence. The jump came after the biotech released solid second-quarter earnings, and a couple of analysts upgraded the company.

So what

Intercept Pharmaceuticals sold $43.2 million of its primary biliary cholangitis drug Ocaliva, a whopping 42% year-over-year increase. Sales outside the U.S. more than tripled, but that wasn't so hard, considering that such sales were just $2.6 million in the year-ago quarter.

Ocaliva has a long way to go to be a blockbuster -- management is guiding for 2018 sales between $170 million and $185 million. But it's a good sign that they're growing following last year's disclosure of 19 deaths and 11 other cases of serious liver injury. The Food and Drug Administration slapped a black box warning on the drug, but highlighting the additional safety concerns doesn't seem to be hampering sales much.

August 2018 calendar

Image source: Getty Images.

With high research and development costs, Intercept Pharmaceuticals is still losing money, but its net loss of $75.2 million was down from the net loss of $86.6 million in the year-ago quarter.

Now what

While primary biliary cholangitis is important to Intercept Pharmaceuticals' short-term prospects, its long-term valuation will be determined by the results of the Regenerate phase 3 study testing Ocaliva in patients with nonalcoholic steatohepatitis, which is a substantially larger market than primary biliary cholangitis.

The release of data from the Regenerate study is scheduled for the first half of 2019. Meanwhile, Intercept just needs to grow sales of Ocaliva at a substantial enough clip to keep investors happy until the data readout. With $538.3 million in the bank, the company looks like it has enough of a cash runway to get to the data readout, no matter how much sales it registers in the second half of the year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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