Shares of Intercept Pharmaceuticals (NASDAQ: ICPT), a small-cap biotech company focused on the development of drugs to treat an assortment of liver diseases, vaulted higher by as much as 10% on Wednesday after the company reported its third-quarter earnings results. As you can likely surmise by the strong move higher, Intercept managed to gallop past the Street's consensus estimate.
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For the quarter, Intercept wound up reporting worldwide sales of Ocaliva, the company's only approved drug, of $40.9 million. Sales of the primary biliary cholangitis (PBC) drug totaled $36.2 million in the U.S., which included a favorable $3.7 million for the change in estimate related to deferred revenue. International sales totaled $4.7 million, including a $0.4 million change in estimate related to deferred revenue. This additional $4.1 million in deferred sales is a result of the company now recognizing revenue when Ocaliva is sold to specialty pharmacies, as opposed to recognizing that revenue when it's dispensed to patients from specialty pharmacies, as it had been doing in the past.
In terms of the company's bottom line, Intercept delivered a net loss of $72.6 million, or $2.89 a share, which was an improvement over the $88.8 million ($3.40 a share) it lost in the previous-year quarter.
By comparison, Wall Street had only been looking for $36.95 million in sales and a wider loss of $3.40 per share, meaning Intercept topped expectations on both fronts.
Intercept also announced that its full-year operating expenses are expected to fall in the middle of its previously forecasted range of $380 million to $420 million. Though this might seem high, this spending is needed to support its ongoing launch of Ocaliva in PBC, as well as further its potential in nonalcoholic steatohepatitis (NASH), primary sclerosing cholangitis (PSC), and other possible diseases.
This earnings report provided some sunshine on what's been a cloudy couple of months for Intercept. Ocaliva has been the center of attention in recent weeks after the Food and Drug Administration disclosed that 19 people with PBC had died while taking the drug. This raised concerns about Ocaliva's safety and led to a handful of downgrades from Wall Street investment banks.
However, these concerns could turn out to be overblown for a variety of reasons. To begin with, a number of the PBC patients who passed away were given too high a dose of Ocaliva. Intercept recommends just one 5 mg pill weekly for the sickest PBC patients, but some had been receiving it daily. Stepping up physician and consumer education of the drug should fix the problem.
More importantly, these safety concerns haven't reared their head in other clinical studies. While it's true that medicines can respond differently depending on the disease, neither the previously reported Flint study in NASH, nor the recently reported Aesop trial in PSC, showed any serious adverse events that were out of the ordinary relative to the placebo.
But the biggest catalyst of all could be what Ocaliva can do for NASH patients. The Flint study demonstrated encouraging improvement in NAFLD Activity Score, fibrosis, and NASH resolution relative to the placebo, and the phase 3 Regenerate study could confirm this clinical effect for researchers. At the company's current valuation, very little credence is being given to NASH, which is a multi-billion-dollar indication. Though I admit to being biased as a shareholder, I foresee an "Oca-liftoff" in Intercept's long-term future.
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