Will Intercept Stock Potential Be Blindsided By FDA Letter?

Shares of Intercept Pharmaceuticals Inc (NASDAQ: ICPT) lost around one quarter of their value Thursday and another 7 percent early Friday morning in reaction to a concerning U.S. Food and Drug Administration letter sent to doctors regarding its liver treatment product called Ocaliva for the treatment of primary biliary cholangitis. But some investors are now wondering if the notable selloff has created a buying opportunity or if the stock should be avoided.

While there is little doubt that the FDA's letter adds some risk to Intercept's outlook, analysts at BMO Capital Markets continue to hold a bullish stance on the stock. The firm's M. Ian Somaiya maintains an Outperform rating on Intercept's stock with a price lowered from $221 to $160.

Of particular note, the FDA's letter is unlikely to be followed up with a label change related to liver severe adverse events, Somaiya commented in a research report. The warnings in the letter already describe the risks, required monitoring and dose-adjustment requirements. Nevertheless, it is likely that doctors will be "more cautious" in prescribing Ocaliva mostly in patients with moderate-to-severe hepatic impairment patients (2 to 3 percent of addressable PBC) but also in the no/mild impairment segment.

This does create some commercial risk ahead and investors should be paying attention to new prescriptions/total prescriptions in the coming week for any signs of headwinds, the analyst added. Also, the FDA's letter should have a "limited read-through" to NASH but the company could still see "increased scrutiny" from the regulatory body in the Phase 3 readout, especially since NASH utilizes a 25mg/day dose.

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