Intercept Pharmaceuticals (NASDAQ:ICPT) enjoyed a great year in 2018. The biotech's share price soared nearly 73% last year, as Intercept's revenue increased significantly. Intercept has also gotten off to a pretty good start in 2019, with its stock up 16%.

However, many investors tend to wonder whether a stock can keep going up after a big run like Intercept has had. It's easy to see in retrospect that the biotech stock was a smart pick to buy months ago. But is Intercept Pharmaceuticals a buy now?

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Why buy Intercept?

You can pretty much sum up the reason to consider buying Intercept in one word: Ocaliva. It's the company's lead product. And it's what drove Intercept's revenue to grow to nearly $47 million in the third quarter.

Intercept won FDA approval for Ocaliva in combination with ursodeoxycholic acid in treating primary biliary cholangitis (PBC) in 2016. PBC is a rare chronic liver disease in which bile ducts in the liver become inflamed and damaged. It can lead to cirrhosis and liver failure.

PBC affects nearly 1 in 1,000 women over age 40 and affects men to a lesser extent. That might not seem like a big potential market for Intercept at first glance.

However, in the U.S. alone there are probably at least 75,000 PBC patients. With Ocaliva priced at close to $70,000 per year, this represents a potential addressable market of more than $5 billion annually in the United States. The drug has also won regulatory approvals for PBC in Canada, Europe, and Australia, creating an even bigger international market opportunity.   

But an even more promising indication for Ocaliva could be on the way. Intercept expects to report results in the first quarter of 2019 from its phase 3 Regenerate study of Ocaliva in treating non-alcoholic steatohepatitis (NASH) fibrosis. If these results are positive, the company plans to file for approval on the basis of the Regenerate study data.

Some industry observers think NASH could become a $35 billion market. Like PBC, it's a rare chronic liver disease and has quickly risen to become one of the leading causes of liver transplants. There are no drugs currently approved for NASH, and Intercept could become the first company to launch a treatment for the disease. 

Why stay away?

The scenario for Intercept looks pretty good. However, there are two potentially significant hurdles for the biotech.

First, Ocaliva has some potential safety issues. The drug's label comes with a black-box warning about the possibility of liver failure and even death if incorrect doses of Ocaliva are taken. In addition, a significant number of patients taking Ocaliva experience severe itching, which lessens the drug's appeal.

These safety concerns make the second hurdle that Intercept faces more daunting. Other companies are developing NASH and PBC drugs, too.

French drugmaker Genfit (NASDAQOTH:GNFTF) expects to report interim results from a phase 3 study of elafibranor in treating NASH later in 2019. The company could be set to file for regulatory approval in the NASH indication by late 2020 or early 2021. Elafibranor could potentially be viewed as more effective and safer than Ocaliva based on earlier clinical results. Genfit is also evaluating elafibranor in treating PBC, with positive phase 2 results announced in December 2018.

Gilead Sciences (NASDAQ:GILD) could beat Intercept to market with its NASH drug, selonsertib. The big biotech recently stated that it plans to file for regulatory approval for the drug in the second half of this year if results from two phase 3 studies are positive. Gilead is also evaluating two other drugs in phase 2 studies in treating both NASH and PBC. One of those drugs is an FXR agonist, the same mechanism of action Ocaliva uses.

There are also a couple of small biotechs with promising NASH drugs. Madrigal Pharmaceuticals reported overwhelmingly positive results in May 2018 for its lead NASH candidate, MGL-3196. Viking Therapeutics followed in September with great results for its own NASH drug, VK2809.

Weighing the pros and cons

I don't think investors should underestimate how heated the competition could be in NASH and eventually in PBC. Intercept isn't a slam-dunk winner by any stretch of the imagination.

However, the market will almost certainly be big enough for several drugs to be successful. I suspect that Ocaliva will be one of them. Despite its big run-up over the past year or so, Intercept's market cap is still only around $3.5 billion. Ocaliva should have a good shot at reaching blockbuster status, which means Intercept still has room to run.

My view is that Intercept is still a stock to consider buying. However, I also think there are other stocks, including some biotechs, that are even better picks.

Keith Speights owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy.