Saturday, March 15, 2014

Intercept Pharmaceuticals: Higher Approval Probability, Higher Price

When a biotech stock has already gained 556% this year, like Intercept Pharmaceuticals (ICPT) has, there’s really only one thing for an analyst to do–raise their price target. And that’s exactly what Citigroup did today with Intercept Pharmaceuticals, the best performing biotech company in the Russell 2000.

Intercept Pharmaceutical has surged 576% this year after gaining today, besting InterMune’s (ITMN) 119% spike and Sangamo BioSciences’ (SGMO) 63% advance.

Citigroup’s Jonathan Eckard and team explain why they’re even more excited about Buy-rated Intercept Pharmaceuticals:

We are raising [Intercept Pharmaceuticals' target price] to $700 (+$100) based on higher regulatory confidence following a thorough assessment of FDA history with blood lipid changes in other settings involving liver damage/repair. We believe the FDA's understanding of these lipid changes is under-recognized by the Street and the agency's past "lack of" response to them highlights this. Therefore, we expect the lipid changes in the FLINT trial are likely to receive less regulatory scrutiny than current Street expectations and this is not reflected in [Intercept Pharmaceuticals'] current valuation. We also believe certain FLINT data could be publicly available by the end of July and before the anticipated AASLD showing.

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What does all that mean for Intercept Pharmaceuticals? Here’s the one-sentence version: “Our increase is driven primarily by higher probability of approval and more rapid penetration into the most severe NASH population.”

Shares of Intercept Pharmaceuticals have gained 2.9% to $461.11, while InterMune has dropped 2.9% to $32.29 and Sangamo BioSciences has dipped 0.5% to $22.67.

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