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Why Intercept Pharmaceuticals Is Poised to Pull Back

By Brian D. Pacampara, CFA - Apr 24, 2013 at 10:34AM

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Market-lagging returns could be written in this 1-Star.

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, biopharmaceutical company Intercept Pharmaceuticals (ICPT 6.72%) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Intercept and see what CAPS investors are saying about the stock right now.

Intercept facts

Headquarters (founded)

New York (2002)

Market Cap

$579.7 million

Industry

Biotechnology

Trailing-12-Month Revenue

$2.4 million

Management

Founder/CEO Mark Pruzanski
CFO Barbara Duncan

Trailing-12-Month Return on Equity

(137.8%)

Cash/Debt

$110.3 million / $0

Competitors

AstraZeneca
Salix Pharmaceuticals

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 69% of the 16 members who have rated Intercept believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those Fools, zzlangerhans, succinctly summed up the bear case for our community:

Intercept is now valued at [$580M]. That's not unheard of for a biopharma that recently went public in the midst of a phase III trial. ... I see vulnerability in the long time period before topline data is released in mid 2014. The major catalyst is the phase III trial of obeticholic acid (OCA) for primary biliary sclerosis. I believe the company is playing down the fact that they are developing OCA as a second-line therapy in PBS for patients who have failed treatment with the standard of care ursodiol. Also, the primary endpoint of the phase III trial is a composite of improvement in liver function tests. My understanding is that using LFT as an indicator of improvement or progression in PBS is controversial, and there is no SPA for the trial. Even with technically positive results of the trial, secondary endpoints may disappoint and the FDA may not be convinced.

I've been wrong about companies like this before and I may be completely misreading this situation. But my instinct tells me that Intercept is ripe for a pullback as traders move on to biopharmas with more near term catalysts, and on CAPS I go with my instincts.

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Stocks Mentioned

Intercept Pharmaceuticals Stock Quote
Intercept Pharmaceuticals
ICPT
$18.57 (6.72%) $1.17
AstraZeneca PLC Stock Quote
AstraZeneca PLC
AZN
$67.40 (1.05%) $0.70

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