Intercept Pharma Shares Higher Following New Buy Rating, $465 Target From UBS

In a report published Friday, UBS analysts initiated coverage of Intercept Pharmaceuticals Inc ICPT with a Buy rating and a price target of $465.

Intercept Pharma's share price has surged 76 percent this year, versus a 19 percent gain by the NBI. Despite this outperformance, the analysts see "favorable risk-reward ahead of the approval and the commercial launch of key value driver obeticholic acid (OCA) in PBC."

In the report UBS highlights the key tenets of its thesis as:

1. The upcoming PBC launch commanding greater pricing power - implying that the segment could be worth $155 per share on a standalone basis, excluding PSC. "This suggests significant valuation support for the stock," the analysts said.
2. Upside to NASH estimates - "With NASH in the model, our valuation swings from $350-550 depending on price and utilization, suggesting upside to market estimates," the analysts added.
3. Scarcity of drugs that actually work in liver disease - The analysts believe that this would "drive increasing strategic value ahead of the commercial launch."

"In our view, numbers may rise into the PBC launch, and strategic interest may intensify." The 2Qe agreement with regulators on the ph3 trial design for OCA in NASH may clarify that an 18-mo interim analysis "should be sufficient for filing to the FDA for accelerated approval." Moreover, this may suggest "FDA comfort with the LDL increases," the analysts wrote.

"Ph2 data in PSC (1H16e) could add another chunky upward revision. Lastly, we believe there is the lack of downside catalysts in the near term to undo the re-rating," the report stated.