Morgan Stanley Sees 33% Downside At Intercept Pharma, Increased Risk

• Shares of Intercept Pharmaceuticals Inc ICPT have declined 40.3 percent over the past three months, from a high of $274.94 on July 28.
• Morgan Stanley's Andrew S. Berens has maintained an Underweight rating on the company, while lowering the price target from $165 to $110.
• Following the failure if the Japanese NASH trial, Berens expressed concern OCA demonstrating direct anti-fibrosis benefit, while mentioning that there could be 33 percent downside to the stock.

Analyst Andrew Berens mentioned that Intercept Pharma released the data from the Phase 2 Japanese NASH trials on October 28. The data has led to increased concerns on the “commercial viability of OCA in NASH,” unless “a conclusive, direct antifibrosis benefit,” is demonstrated.

However, data regarding such benefit will only be available on completion of the interim analysis of the REGERNERATE trial, which is expected in 2018. For now, Berens believes that the current pricing assumptions might be optimistic.

In addition, Berens believes that “OCA's lipid profile and tolerability are not conducive for use in earlier stages of NASH, where cardiovascular and metabolic concerns are the primary focus of clinicians.”

The Japanese data also create uncertainty regarding the fibrosis benefit demonstrated in FLINT, despite the dose in the Japanese trial being higher than those used in the FLINT trial.

While OCA does not appear to have “viable tolerability or lipid profile to gain traction in early NASH,” without the fibrosis benefit Intercept Pharma would be unable to “position the drug in later stages of the disease,” either.