Why investors loved Intercept Pharmaceuticals third quarter update
Intercept pharmaceuticals (NASDAQ: ICPT) really need good news. Its shares have plunged more than 70% year-to-date, with most of the drop coming after the Food and Drug Administration approved obeticholic acid (OCA) as a treatment for non-alcoholic steatohepatitis (NASH ).
The drugmaker announced its third quarter results ahead of the market opening Monday, and at least delivered good news to investors. Here are the highlights.
By the numbers
Intercept reported revenue of $ 79.5 million, a 28% year-over-year jump. That result exceeded analysts’ average estimate of $ 78.6 million.
The company reported a third quarter net loss of $ 66.5 million, or $ 2.01 per share, based on generally accepted accounting principles (GAAP). This was better than Intercept’s GAAP net loss of $ 84.8 million, or $ 2.59 per share, during the prior year period. However, it still underperformed the Wall Street consensus estimate for a net loss of $ 1.93 per share.
Another important financial measure for Intercept is its cash flow position. The company ended the quarter with cash, cash equivalents, restrictive cash and investment debt securities of $ 496.8 million. This is a decrease from its cash stocks of $ 657.3 million as at December 31, 2019.
Behind the numbers
The primary biliary cholangitis (PBC) drug Ocaliva generated all of Intercept’s net sales in the third quarter: $ 58.6 million in U.S. net sales and $ 20.9 million in international sales. The improvement in the company’s bottom line is largely due to increased sales of Ocaliva, as well as lower expenses.
It reduced its selling, general and administrative (SG&A) expenses by 8% year-on-year to $ 70.6 million. Intercept attributed most of this reduction in spending to the delay in potential OCA approval for the treatment of NASH. The company’s research and development spending also fell nearly 19% year-on-year to $ 48.9 million. This decrease is mainly due to the decrease in the development costs of NASH drugs.
Intercept lowered its forecast for the entire year. The company now expects Ocaliva’s 2020 net sales to be between $ 310 million and $ 320 million, compared to its previous forecast range of $ 300 million to $ 320 million, and is forecasting operating expenses. adjusted between $ 460 million and $ 480 million. Management’s previous forecast called for adjusted operating expenses in the range of $ 460 million to $ 500 million.
Best news of all for investors in this biotechnology stocks, however, is that the outlook is now brighter for possible FDA approval of OCA for the treatment of NASH. CEO Mark Pruzanski said the company had had a “constructive” meeting with the FDA and claimed that Intercept could potentially resubmit its regulatory dossier for OCA in the NASH indication next year.
Intercept had hoped to be the first to hit the market with a treatment for NASH. Other companies have also faced setbacks with their programs to develop treatments for liver disease, and some remain well behind Intercept. For example, Viking Therapeutics recently declared that it is recruiting patients in a phase 2b study of its leading NASH candidate, VK2809. Thus, there is still a possibility that Intercept’s OCA is the first FDA-approved treatment for NASH.
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