Announcement • Sep 16

Intercept Announces Statement on FDA Advisory Committee Meeting

The Gastrointestinal Drugs Advisory Committee (GIDAC) of the U.S. Food and Drug Administration (FDA) met to discuss Intercept’s supplemental New Drug Application (sNDA) for OCALIVA® (obeticholic acid, OCA) for the treatment of primary biliary cholangitis (PBC) – a rare, progressive disease that disproportionally affects women. The sNDA was submitted to support full approval of OCALIVA and to satisfy post-marketing requirements confirming a clinical benefit in patients with PBC. With more than 42,000 years of collective real-world patient experience over eight years of being on the market, OCALIVA is the first approved second-line therapy with multiple peer-reviewed study results. Intercept is grateful for the continuous support of the PBC community, including those patients and healthcare providers who contributed to today’s meeting, and will continue to work collaboratively with the FDA on behalf of patients. While the FDA will take into consideration the committee’s vote, the vote is not binding upon the agency. The FDA will make the final decision and has assigned a Prescription Drug User Fee Act (PDUFA) target action date of October 15, 2024. Primary biliary cholangitis (PBC) is a rare, progressive, and chronic autoimmune disease that affects the bile ducts in the liver and is most prevalent (approximately one in 10,000) in women over the age of 40. PBC causes bile acid to build up in the liver, resulting in inflammation and scarring (fibrosis), which, if left untreated, can lead to cirrhosis, a liver transplant, or death. About OCALIVA®(obeticholic acid) OCALIVA, a farnesoid X receptor (FXR) agonist, is indicated for the treatment of adult patients with primary biliary cholangitis (PBC) without cirrhosis or with compensated cirrhosis who do not have evidence of portal hypertension, either in combination with ursodeoxycholic acid (UDCA) with an inadequate response to UDCA or as monotherapy in patients unable to tolerate UDCA. This indication is approved under accelerated approval based on a reduction in alkaline phosphatase (ALP). An improvement in survival or disease-related symptoms has not been established. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. Contraindications OCALIVA is contraindicated in patients with: decompensated cirrhosis or a prior decompensation event. compensated cirrhosis who have evidence of portal hypertension (e.g., ascites, gastroesophageal varices, persistent thrombocytopenia). complete biliary obstruction. Hepatic decompensation and failure, sometimes fatal or resulting in liver transplant, have been reported with OCALIVA treatment in PBC patients with cirrhosis, either compensated or decompensated. Among post-marketing cases reporting it, median time to hepatic decompensation (e.g., new onset ascites) was 4 months for patients with compensated cirrhosis; median time to a new decompensation event (e.g., hepatic encephalopathy) was 2.5 months for patients with decompensated cirrhosis. Some of these cases occurred in patients with decompensated cirrhosis when they were treated with higher than the recommended dosage for that patient population; however, cases of hepatic decompensation and failure have continued to be reported in patients with decompensated cirrhosis even when they received the recommended dosage. Hepatotoxicity was observed in the OCALIVA clinical trials. A dose-response relationship was observed for the occurrence of hepatic adverse reactions including jaundice, worsening ascites, and primary biliary cholangitis flare with dosages of OCALIVA of 10 mg once daily to 50 mg once daily, as early as one month after starting treatment with OCALIVA in two 3-month, placebo-controlled clinical trials in patients with primarily early stage PBC. Routinely monitor patients for progression of PBC, including hepatic adverse reactions, with laboratory and clinical assessments to determine whether drug discontinuation is needed. Closely monitor patients with compensated cirrhosis, concomitant hepatic disease (e.g., autoimmune hepatitis, alcoholic liver disease), and/or with severe intercurrent illness for new evidence of portal hypertension (e.g., ascites, gastroesophageal varices, persistent thrombocytopenia), or increases above the upper limit of normal in total bilirubin, direct bilirubin, or prothrombin time to determine whether drug discontinuation is needed. Permanently discontinue OCALIVA in patients who develop laboratory or clinical evidence of hepatic decompensation (e.g., ascites, jaundice, variceal bleeding, hepatic encephalopathy), have compensated cirrhosis and develop evidence of portal hypertension (e.g., ascites, gastroesophageal varices, persistent thrombocytopenia), experience clinically significant hepatic adverse reactions, or develop complete biliary obstruction. If severe intercurrent illness occurs, interrupt treatment with OCALIVA and monitor the patient’s liver function. After resolution of the intercurrent illness, consider the potential risks and benefits of restarting OCALIVA treatment. Severe pruritus was reported in 23% of patients in the OCALIVA 10 mg arm, 19% of patients in the OCALIVA titration arm, and 7% of patients in the placebo arm in a 12-month double-blind randomized controlled clinical trial of 216 patients. Severe pruritus was defined as intense or widespread itching, interfering with activities of daily living, or causing severe sleep disturbance, or intolerable discomfort, and typically requiring medical interventions. Consider clinical evaluation of patients with new onset or worsening severe pruritus. Management strategies include the addition of bile acid binding resins or antihistamines, OCALIVA dosage reduction, and/or temporary interruption of OCALIVA dosing. Patients with PBC generally exhibit hyperlipidemia characterized by a significant elevation in total cholesterol primarily due to increased levels of high-density lipoprotein-cholesterol (HDL-C). Dose-dependent reductions from baseline in mean HDL-C levels were observed at 2 weeks in OCALIVA-treated patients, 20% and 9% in the 10 mg and titration arms, respectively, compared to 2% in the placebo arm. Monitor patients for changes in serum lipid levels during treatment. For patients who do not respond to OCALIVA after 1 year at the highest recommended dosage that can be tolerated, and who experience a reduction in HDL-C, weigh the potential risks against the benefits of continuing treatment. The most common adverse reactions (=5%) are: pruritus, fatigue, abdominal pain and discomfort, rash, oropharyngeal pain, dizziness, constipation, arthralgia, thyroid function abnormality, and eczema. Drug Interactions: Bile Acid Binding Resins Bile acid binding resins such as cholestyramine, colestipol, or colesevelam adsorb and reduce bile acid absorption and may reduce the absorption, systemic exposure, and efficacy of OCALIVA.

Seeking Alpha • Aug 13

Intercept Pharmaceuticals: Too Risky To Buy At This Stage

Intercept Pharmaceuticals has an important binary event coming up: the FDA’s decision regarding their NDA for Ocaliva in treating NASH. Information included in its most recent earnings report does little to inspire hope that this next decision will be any different from the last one. I am skeptical that the new efficacy and safety data will meet the FDA’s high standards for NASH. PBC sales are largely flat, highlighting how important breaking into the NASH market is for Intercept. Those who are confident in the therapeutic benefits of Ocaliva in treating NASH should consider initiating a long position after FDA approval, because the stock then would be meaningfully derisked. Introduction Intercept Pharmaceuticals (ICPT) announced its second quarter earnings results two weeks ago, revealing that it intends to resubmit Ocaliva's NDA for NASH by the end of the year. This is welcome news to many long-time Intercept holders, as they have been waiting for the resubmission ever since the FDA first denied the application in 2020. Also due soon, by the end of this quarter, are results from its REVERSE trial, which is evaluating Ocaliva as a NASH compensated cirrhosis treatment. Shares have since traded upwards by ~30% as of the time of writing. Enthusiasm has begun to bubble up again as these two binary events loom, but is optimism misplaced? Whether or not REVERSE will yield a successful outcome is uncertain, as NASH cirrhosis is more difficult to treat; the livers are more damaged; and the market is much smaller than the market for NASH Fibrosis. About 5-12% of those with NASH go on to develop NASH cirrhosis, and REVERSE looks at a subgroup of cirrhosis patients - those with compensated cirrhosis (meaning asymptomatic cirrhosis). The outcome of this trial will be important and will provide more clarity, but not critical in the same vein as the FDA decision. All eyes will really be on the FDA's upcoming decision, as it represents the largest market and will give perspective as to how stringent the FDA will be when it comes to approval. I am skeptical that this update about the company's resubmission plans does much to alleviate the fundamental issues that have plagued Intercept for the past eight years. Namely, it does not add enough color on Ocaliva's NDA resubmission prospects - nor does it add much information regarding the new data Intercept is submitting in its NDA. With the company's PBC sales flattening, much of Intercept's future value is dependent on the decision making of the FDA. If it were to approve Ocaliva as a NASH treatment, Intercept would easily become a multi-bagger. But if not, then Intercept would have to go back to the drawing board yet again. Thesis I believe that it would be unwise to bet on approval; simply not enough has changed between this NDA and the last NDA to warrant a changed opinion from the FDA. New data and analysis produced by Intercept does not add much to the picture, and Intercept has not released the full CRL letter. So it is impossible to exactly discern what the FDA wants to see. Given the safety profile of Ocaliva - and the black box label which comes with it as a PBC treatment - there is great reason to believe that the FDA will think cautiously when considering Intercept's NDA. If I had to bet on it, I would say that the FDA will either reject the NDA outright or grant conditional approval contingent upon a safety trial; either outcome would be disastrous for Intercept. But there is no need to bet on this outcome; not even Intercept knows what will happen. Even if you are bullish and convinced that Ocaliva's benefits outweighs its risks - that the company will be successful in commercializing Ocaliva - it would still be more prudent to build a long position after the FDA's decision and not prior to it. You lose out on some investment gains, but you successfully de-risk your investment thesis by a significant margin. Until the FDA decides its course of action, I would tentatively give Intercept a sell-rating. Financials Looking over its last earnings report reveals both bright and dim spots. On the bright side, Intercept's balance sheet is rock-solid. It has about ~$65 million in cash and cash equivalents on hand with another ~$346 million in liquid debt securities. And the company only saw a net loss of $7.5 million, a decrease YoY from $11.1 million in Q2'21. Net revenues rose slightly too, with PBC sales increasing YoY by a small margin. Total non-GAAP adjusted sales came out to be $100.4 million while U.S sales clocked in at $71.8 million. During the same quarter last year, sales were $96.6 million and $68.2 million for those respective categories. A dimmer interpretation of this slow growth is that Ocaliva is close to reaching peak revenues in the PBC market - which would be unfortunate considering how Intercept has not reached profitability yet. Intercept has never been profitable, despite Ocaliva being approved for PBC since 2017. The company selling its international rights to Ocaliva for only ~$450 million shows that management is not confident in its ability to squeeze more growth from international markets, in my view. One somewhat concerning aspect of the balance sheet is the high amount of debt. At the moment, Intercept has about $713 million in debt, most of which is comprised of 2023 and 2026 convertible notes. Value Maturity Date *Unless Converted/Repurchased/Redeemed Conversion Rate Conversion Price 2026 Convertible Secured Notes 543,370,000 February 15, 2026 47.7612 $20.94 2026 Convertible Unsecured Notes 69,492,000 May 15, 2026 9.2123 $108.55 2023 Convertible Unsecured Notes 107,727,000 July 1, 2023 5.0358 $198.56 Source: Table Constructed By Author, Information Drawn From Q2'22 10-Q Filing Conversion rates for these notes vary wildly, but the good thing is that the conversion dates for most of the notes are in 2026, giving the company time to make that price-point. Not so good is that the conversion prices are somewhat high compared to the current share price. The largest tranche of notes, the 2026 secured convertible notes, has a conversion price of ~$20.94 - which is only about ~17% higher than the current share price as of the time of writing. Even if the stock does appreciate 17%, it is unlikely that a majority of investors would choose to convert their loans into equity unless Intercept clears the NASH regulatory hurdle: there is no incentive for debt-holders to convert their stakes into equity positions unless the future is meaningfully de-risked; having their investment in the form of debt gives them a layer of protection in exchange for less upside. Many investors see high conversion prices as a good thing, since they want to see minimal shareholder dilution. In this case, it may not be so good. If Intercept is unable to meaningfully lift its stock price or grow its revenue, this debt could prove to be an existential burden for the company. Sales from PBC alone won't cut it as a revenue solution - Intercept needs regulators to unlock the NASH market if it wants to overcome its debt. No unlock may mean that shareholders don't get diluted by conversion, but it would also create solvency issues for Intercept; the bill will eventually come forward in one way or another. Right now, Intercept has enough cash to buy valuable time for itself. But eventually, that debt will either be converted or has to be paid off. And currently, Intercept does not have enough cash on hand to pay off its debt in full. The only way the company can meet its obligations, short of conversion, is by selling more shares or refinancing its debt. Neither the capital markets or creditors would give Intercept favorable financing options if it tries to negotiate without Ocaliva's approval for NASH in hand. Short of approval, this debt represents a major threat to the future of Intercept. Ocaliva Faces Long Odds A core component of my skepticism towards Intercept is that I believe Ocaliva faces long odds for FDA approval. In 2020, the FDA rejected Intercept's Ocaliva NDA for NASH, informing them that the "predicted benefit… remains uncertain." Much of this uncertainty stems from Ocaliva's modest efficacy and unbalanced safety profile. On the efficacy side, Ocaliva only hit one of the two primary endpoints in REGENERATE, which was the phase three trial evaluating Ocaliva as a NASH treatment. Both the 10 milligram and 25 milligram dosage of Ocaliva managed to demonstrate a statistically significant improvement over placebo with the fibrosis reduction endpoint, but neither dosage achieved statistical significance over placebo with NASH resolution - the other endpoint. For the fibrosis endpoint, it should also be noted that the 10 milligram arm showed a p-value of only 0.0446, just barely passing the hurdle for what the FDA considers statistically significant. The higher dosage, 25 milligrams, had a stronger p-value of 0.0002. Another important aspect to consider is that there were serious safety concerns that appeared dose-dependent. 28% and 51% of those in the 10 milligram and 25 milligram arm respectively reported pruritus - also known as chronic itching - compared to just 19% in the placebo arm. ~9% of those in the 25 milligram arm had to discontinue treatment because of pruritus. Higher incidences of biliary/hepatic adverse events were observed in the 25 milligram arm compared to placebo too, but this increase was not statistically significant. Dose-dependent reductions in HDL cholesterol, known as the good cholesterol, was observed in this trial as well as other trials too. For those with high levels of cholesterol or cardiac issues, this is a big deal. One unfortunate aspect of NAFLD/NASH is that both conditions are tied to cardiovascular disease; there exists medical literature closely linking the two. There is little doubt in my mind that the FDA considers this aspect of the safety profile when weighing the risks and benefits of Ocaliva.

Interest coverage ratio	n/a
Cash	US$322.71m
Equity	US$71.85m
Total liabilities	US$321.32m
Total assets	US$393.16m

Data	Last Updated (UTC time)
Company Analysis	2023/11/09 01:07
End of Day Share Price	2023/11/07 00:00
Earnings	2023/09/30
Annual Earnings	2022/12/31

Package	Data	Timeframe	Example US Source ^*
Company Financials	10 years	Income statement Cash flow statement Balance sheet	SEC Form 10-K SEC Form 10-Q
Analyst Consensus Estimates	+3 years	Forecast financials Analyst price targets	Analyst Research Reports Blue Matrix
Market Prices	30 years	Stock prices Dividends, Splits and Actions	ICE Market Data SEC Form S-1
Ownership	10 years	Top shareholders Insider trading	SEC Form 4 SEC Form 13D
Management	10 years	Leadership team Board of directors	SEC Form 10-K SEC Form DEF 14A
Key Developments	10 years	Company announcements	SEC Form 8-K

Analyst	Institution
James Birchenough	BMO Capital Markets Equity Research
Geoffrey Meacham	BofA Global Research
Chiara Russo	Brean Capital Historical (Janney Montgomery)

This company has been acquired

Intercept Pharmaceuticals Balance Sheet Health

Financial Health criteria checks 5/6

Key information

Recent financial health updates

Intercept Pharmaceuticals, Inc. Files Form 15

Intercept Pharmaceuticals' Common Stock Ceased to be Traded on the NASDAQ Stock Market

Intercept Pharmaceuticals (NASDAQ:ICPT) Has Debt But No Earnings; Should You Worry?

Health Check: How Prudently Does Intercept Pharmaceuticals (NASDAQ:ICPT) Use Debt?

Recent updates

Intercept Pharmaceuticals, Inc. Receives Complete Response Letter from FDA Addressing OCALIVA Supplemental New Drug Application (sNDA)

Intercept Pharmaceuticals, Inc. Provides Regulatory Update Regarding sNDA for OCALIVA

Intercept Announces Statement on FDA Advisory Committee Meeting

Intercept Presents New Sub-Analyses of Phase 3 Poise Data Showcasing the Effect of Oca on Key Liver Biomarkers in Patients with PBC at EASL Congress 2024

Intercept Pharmaceuticals, Inc. Files Form 15

Intercept Announces New Phase 2 Data Showing Significant Impact of OCA-Bezafibrate Combination on Normalization of Multiple Key Biomarkers of PBC-Induced Liver Damage At AASLD the Liver Meeting® 2023

Intercept Pharmaceuticals, Inc. Announces New Findings from Long-Term Extension of Landmark POISE Trial in PBC Showing Importance of Biomarkers Beyond ALP at AASLD the Liver Meeting® 2023

Intercept Pharmaceuticals' Common Stock Ceased to be Traded on the NASDAQ Stock Market

Intercept Pharmaceuticals, Inc.(NasdaqGS:ICPT) dropped from NASDAQ Biotechnology Index

Third quarter 2023 earnings: EPS exceeds analyst expectations

Persephone Biosciences Appoints Daniel Bradbury as Chair of the Board of Directors

Price target increased by 25% to US$18.30

Alfasigma S.p.A. entered into a definitive merger agreement to acquire Intercept Pharmaceuticals, Inc. (NasdaqGS:ICPT) for approximately $840 million.

Now 20% undervalued after recent price drop

Now 22% undervalued after recent price drop

Intercept Pharmaceuticals Provides Net Sales Guidance for the Full Year of 2023

Second quarter 2023 earnings: EPS and revenues exceed analyst expectations

Intercept Pharmaceuticals, Inc. to Report Q2, 2023 Results on Aug 02, 2023

Price target decreased by 24% to US$15.08

Intercept Pharmaceuticals, Inc. Presents New Data Showing Significant Impact of OCA-Bezafibrate Combination on Normalization of Multiple Biomarkers of PBC-Induced Liver Damage

Intercept Pharmaceuticals, Inc. Announces New Data Showing Potential of Fixed-Dose Combination of OCA and Bezafibrate to Normalize Multiple Biomarkers in PBC to be Featured in Podium Presentation at EASL Congress 2023

Revenues Working Against Intercept Pharmaceuticals, Inc.'s (NASDAQ:ICPT) Share Price Following 25% Dive

Price target decreased by 14% to US$21.00

Forecast breakeven date moved forward to 2024

First quarter 2023 earnings: EPS and revenues miss analyst expectations

Consensus EPS estimates fall by 11%

Consensus EPS estimates fall by 11%

Intercept Pharmaceuticals (NASDAQ:ICPT) Has Debt But No Earnings; Should You Worry?

Price target increased by 9.9% to US$24.00

Full year 2022 earnings: EPS exceeds analyst expectations while revenues lag behind

Price target decreased by 8.2% to US$20.85

U.S. Food and Drug Administration Accepts Intercept Pharmaceuticals, Inc.'s New Drug Application for OCA for the Treatment of Pre-Cirrhotic Liver Fibrosis Due to Nash

Consensus forecasts updated

Forecast breakeven date pushed back to 2025

Health Check: How Prudently Does Intercept Pharmaceuticals (NASDAQ:ICPT) Use Debt?

Consensus forecasts updated

Third quarter 2022 earnings: EPS exceeds analyst expectations while revenues lag behind

Price target decreased to US$24.00

Intercept touts Ocaliva benefit in transplant-free survival in liver disease type

Intercept cuts debt further with deal to exchange convertible notes

Intercept reduces debt with repurchases of $327.9M convertible notes

Intercept Pharmaceuticals: Too Risky To Buy At This Stage

Second quarter 2022 earnings: EPS and revenues miss analyst expectations

Intercept Pharma Q2 2022 Earnings Preview

Consensus forecasts updated

Forecast breakeven date moved forward to 2022

Intercept to resubmit for FDA approval of NASH candidate after new analysis

Intercept: Increase Of Ocaliva Sales And A Few Catalysts

Consensus estimates of losses per share improve by 93%

Forecast breakeven date moved forward to 2022

Need To Know: Analysts Are Much More Bullish On Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT)

Forecast breakeven date moved forward to 2022

First quarter 2022 earnings: EPS exceeds analyst expectations while revenues lag behind

Consensus estimates of losses per share improve by 29%

Intercept: Opportunity To Buy On Potential NDA Resubmission Of Ocaliva For NASH

Full year 2021 earnings: EPS exceeds analyst expectations

Forecast to breakeven in 2024

Third quarter 2021 earnings released: US$0.11 loss per share (vs US$2.02 loss in 3Q 2020)

Second quarter 2021 earnings released: US$0.33 loss per share (vs US$1.92 loss in 2Q 2020)

Consensus forecasts updated

Independent Director Daniel Welch has left the company

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