Another Wild Ride In Intercept Pharmaceuticals

Intercept Pharmaceuticals Inc ICPT shares are trading lower by $10.35 at $153.45 in Friday's session. It has been a volatile session for the issue and even more volatile if one takes into the price action if the after-hours and pre-market sessions.

A little bit of history on the issue will help put the trading action in proper perspective. Back in January 2014, the issue had one of the most incredible two day runs in the history of the stock market. After closing at $72.39 on January 8, 2014, it leaped to $276.87 on the January 9 and reached an intra-day high of $497 on January 10 before ending the session at $445.03. It should be noted that it was back at $255.12 two sessions later.

The catalyst behind that mind-boggling rally was the announcement the company had met a primary endpoint and a FLINT trial had been stopped early for efficacy based on highly statistical improvement in Liver histology. In layman's terms, a potential cure for cirrhosis and liver failure.

Related Link: Morgan Stanley Downgrades Intercept Shares To Underweight, Cuts Target To $80

The issue did climb back into the $400 handle in February and March of 2014, but as many parabolic moves in stocks end badly, so did this one. Over the course of the next two years, with no comparable news the issue worked its way lower until it finally bottomed in February at $89.76, within $16 of its closing price before its historic run.

Thursday's after hours and Friday's pre-market action was instigated by more news on the drug front. That being the FDA made an unanimous decision of accelerated approval of Intercept's liver drug, Ocaliva. Investors looking for same reaction in the issue similar to the one in 2014, were in a for a big surprise.

From its close on Thursday ($163.83) it leaped to $185 before sharply reversing course. A catalyst for quick reversal may have been a downgrade from Morgan Stanley from Equal-Weight to Underweight and lowered it price target from $100 to $80. Andrew S. Berens noted that the FDA panel did not endorse the drug for use in patients with advanced PBC as well as other restrictions for use in non-responders.

By the open of the regular session, the issue had given back all of its gains and was struggling to stay green. After a lower open, it was unable to reach its closing price ($163.83) stalling at $163.24 and turning lower.

The ensuing decline took the issue all the way to $147.53 before rebounding back into the $150 handle.

A possible reason for the decline is the run-up the issue had ahead of Thursday's announcement. Some investors were forecasting a positive decision from the FDA and aggressively purchased shares ahead of the announcement.

After ending last Friday's session at $130.76, the issue added over $33 by the conclusion of Wednesday's session. The issue did not trade on Thursday until the FDA's decision was released.

When there was no follow through to the upside off the open, investors that purchased shares ahead of the release exited the issue in a classic "buy the rumor and sell the news" scenario.