Morgan Stanley Upgrades Intercept Pharma, Maintains $100 Target

• Intercept Pharmaceuticals Inc ICPT shares have declined 63.88 percent over the past six months, reaching a low of $99.32 on January 28.
• Morgan Stanley’s Andrew S. Berens has upgraded the rating on the company from Underweight to Equal-weight, with a price target of $100.
• Although the stock is likely to remain significantly volatile till the FDA panel in April, Berens believes that the share price already reflects the known risks.

Analyst Andrew Berens mentioned that Intercept Pharma’s share price had declined meaningfully since the announcement in August 2015 that the Phase 2 NASH study in Japan had failed and that there would be a delay of three months in the FDA decision regarding the use of obeticholic acid (OCA) for the treatment of primary billiary cholangitis (PBC).

“While we still have concerns about the clinical, regulatory, and commercial outlook for the OCA development program in both NASH and PBC, at current levels we believe ICPT shares reflect our anticipated risks ahead of the briefing documents to be released for the April 7 FDA advisory panel,” Berens explained.

Berens believes that the panel would not only discuss the risk/benefit of OCA in PBC, but also the validity of using a surrogate endpoint, a smaller than expected market opportunity and relevance of itching and lipid changes.

“Additionally, we anticipate discussions about potential off-label usage in NASH, where the agency may provide its first thoughts about the lipid homeostasis alterations with the drug,” the Morgan Stanley report said.

However, Berens also expressed optimism regarding the possibility of “an ultimate endorsement and approval in PBC.”