Intercept Pharmaceuticals Has More Good News For Investors

We all saw when Intercept Pharmaceuticals jumped from $72.39 per share all the way to $275.87 per share on the NASDAQ. That was an impressive jump in share price and a stock on the NASDAQ hadn't seen that kind of jump since at least 2012. To put it in another perspective the company went from a $1.4 billion market cap all the way to a $5.6 billion market cap. So what caused this type of leap by 281% in one day? 

First we have to look at how biotechs trade. When a company is in clinical trials they go up and down big amounts based off of trial results respectively. So a big trial failure would knock down the stock by 30% or more and if the results are positive the share price of the stock would leap by 30% or more. In the case of Intercept you have to look at it differently. The reason why it gapped up so high is definitely because it obtained positive results, but it did so in a different manner. It did so by doing something that is very rare in biotech although does happen sometimes. Intercept had announced that the trial was stopped after an interim analysis. The interim analysis concluded that Intercept's drug had a high statistical improvement compared to placebo so no further testing was necessary. The trial started back in 2011 and was expected to run up to 2014 with 280 patients enrolled. 

To understand the big gap up and why this is an important drug compound we have to understand what is being treated. Intercept uses the drug compound obeticholic acid or OCA which mimics exactly the bile that is found in human bile acid. The disease being treated is known as non-alcoholic steatohepatitis, which is a collection of fat build up in the liver that causes liver damage over time. The reason we believe it gapped up greatly was because the disease is rare. That is it is only found in up to 2% to 5% of Americans, and there are no treatments available for this rare disease. Patients with lack of options eventually experience cirrhosis or Liver failure. 

With that news in mind Intercept just received Fast Track Designation for another liver indication known as PBC or Primary Biliary Cirrhosis. PBC is another liver disease but it deals with swelling and inflammation of the bile ducts of the liver. With the blocking of the bile ducts the bile causes damage to the liver cells which turns into cirrhosis (scarred or damaged liver). With Intercept working on so many rare liver conditions and with the possibility of each market capturing $2 billion dollars each we believe the company can still trade higher than its current share price of $243 per share. Especially since the 52-week high of the stock hit $497 per share at some point. We believe that Intercept still is a good long term buy and still has room to run a bit more. Although investors should be cautious that this stock can create wild swings back and forth and should invest accordingly to their tolerated risk level.