UPDATE: Morgan Stanley Makes Contrarian Call on Intercept (ICPT), Starts with Underweight Rating

(Updated - August 13, 2015 11:15 AM EDT)

Morgan Stanley initiated coverage on Intercept Pharmaceuticals (NASDAQ: ICPT) with an Underweight rating and a price target of $165. Analyst Andrew S Berens described the rating as one of the firm's "highest conviction, out-of-consensus calls," and warned an upcoming review of OCA will give insight into the drug's adverse lipid effects, potentially resulting in negative implications.

"Near-term, our concerns focus on the FDA review of ICPT's lead candidate, obeticholic acid (OCA), for approval in Primary Biliary Cirrhosis (PBC), which is likely to increase scrutiny of the adverse lipid changes seen in the clinical trials. This review should also provide the first look at new data, including the PBC Lipid Trial. Importantly, we think the review could have negative implications for the drug's larger opportunity, fatty liver (NASH), which is over 80% of ICPT net present value," said the analyst.

Berens added, "Longer term, our July 2015 AlphaWise survey of ~80 US and EU hepatologists and gastroenterologists raises three commercial concerns: (1) Skepticism about the size of the PBC market, given that less than half of PBC patients who fail first-line treatment need more therapy; (2) Up to one-third of patients may discontinue treatment; (3) The NASH opportunity will take time to develop, and is much smaller than expected, with up to half of the patients being deemed unlikely candidates for the drug. The $405 average target price for ICPT suggests consensus is too optimistic."

For an analyst ratings summary and ratings history on Intercept Pharmaceuticals click here. For more ratings news on Intercept Pharmaceuticals click here.

Shares of Intercept Pharmaceuticals closed at $232.32 yesterday.

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