Laidlaw Downgrades Intercept Pharmaceuticals (ICPT) to Sell
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Laidlaw downgraded Intercept Pharmaceuticals (NASDAQ: ICPT) from Buy to Sell with a price target of $105, implying downside of 40%. Analyst Jim Molloy lowered expectations for OCA for NASH.
"The company indicated that FY17 operating expenses are likely to be higher than the $360M $400M spend for FY16, and that the uptake of Ocaliva for PBC in the US and the EU should be expected to proceed at a rather moderated pace. The company has ~$850M in cash (pro-forma) following the July convertible debt offering (which netted ~$409M), which at ICPT’s current prolific spending means they will be down to a year of cash in 2017 (again). While the company has been adept at raising prodigious amounts of capital to date, a key architect of that fund raising ability – former CFO Duncan – has stepped aside for new CFO Kapadia," said Molloy.
The analyst continued, "ICPT’s key asset, OCA for NASH, remains the main reason to own the stock but the pivotal REGENERATE Phase 3 trial data is now a 2019 event (from 2H18 previously), and the important CONTROL lipid study is now a 2H17 event (from 4Q16 previously). ICPT is currently rolling out an expensive worldwide infrastructure to launch a single orphan drug – Ocaliva – which can mean years of slogging to profitability unless additional products can be found to add to the reps’ bags to help more fully utilize the sales force. Our new price target incorporates what we believe are more conservative rollout expectations for Ocaliva for PBC and OCA for NASH, and also incorporates the now extended launch timelines."
Molloy, added, "Most of our lowered PT comes from somewhat more conservative launch expectations for OCA for NASH, and also from our expectations for the launch to be pushed out at least another year to 2H20 (from 2019 previously)."
Shares of Intercept Pharmaceuticals closed at $163.21 yesterday.
(Updated - August 5, 2016 8:48 AM EDT) (Update corrects prior rating.)
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