Investing can accomplish many things. It can help you make extra money with your savings or produce income in retirement, but that doesn’t mean that a well-placed stock purchase ONLY does those things.
Your investments can also go to support causes and cures that matter to you, and help you make money in the meantime.
While there is never a guarantee that you are going to turn a profit – the same as with any investment – at least your money can go towards research that matters to you.
For instance, if you have non-viral liver disease or someone you love does, you could choose to invest in a company that specializes in treating that type of condition, like Intercept Pharmaceuticals, Inc. [NASDAQ: ICPT]
What Does Intercept Pharmaceuticals Do?
Intercept Pharmaceuticals is a biopharmaceutical company that specializes in developing treatments for different types of progressive liver disease that are non-viral.
Its primary focus is on Primary Biliary Cholangitis (PBC), which is an autoimmune disease. PBC causes damage to liver bile ducts.
Intercept also focuses on a fatty liver disease called nonalcoholic steatohepatitis, or NASH as well as biliary atresia, primary sclerosing cholangitis (PSC).
The way Intercept does this is through researching bile acid and the Farnesoid X Receptor (FXR). The company is leveraging this factor to act as an antifibrotic and anticholestatic catalyst and, ultimately, a treatment for different liver diseases as well as metabolic conditions.
Is Intercept Pharmaceuticals A Buy?
Intercept’s primary drug is the obeticholic acid-based Ocaliva®.
It uses the company’s FXR technology to treat PBC in conjunction with ursodeoxycholic acid (UDCA) in situations where UDCA was not effective alone. In some cases, Ocaliva is also used as a standalone treatment.
In 2016, it was approved for use in the United States and it received European Union approval shortly thereafter. Since then, Ocaliva has gotten approval in Australia, Canada, and Israel.
However, Intercept is not a one-trick pony.
The company has four clinical trials underway, some of which are nearing completion. Intercept’s PBC drug is in Phase 4 while its drugs to treat NASH fibrosis (called the REGENERATE trial) and NASH cirrhosis (called the REVERSE trial) are in Phase 3. It also has a biliary atresia drug in phase 2 clinical trial.
The company also has a collaboration with Sumitomo Dainippon Pharma Co. Ltd. to develop OCA-based drugs to treat PBS and NASH in China.
Under the terms of the agreement, Intercept received $15 million upfront and it reached a $6 million milestone payment on December 31, 2018. Intercept will receive up to another $23 million if trials go well and receive royalty payments of around 25% for the IOCA drugs it sells in China under the agreement.
What are the Risks of Investing in Intercept Pharmaceuticals?
The thing about pharmaceutical companies is that they are not successful JUST because they develop a drug that treats a disease or condition.
In order for these companies to be profitable, they have to develop a drug that treats the condition better than other alternatives and at a price that works into the economics of the situation.
They also need to run their businesses well. For pharmaceutical companies, that means diversifying their portfolios – patents don’t last forever – and running successful marketing campaigns.
In the case of Intercept, they haven’t launched a drug before and it takes a fair amount of expertise to commercialize a drug well.
Intercept [NASDAQ: ICPT] needs to be able to convince doctors in their target markets that Ocaliva is worth prescribing and insurance companies that it is worth covering. If doctors don’t offer the drug as an option to their patients or insurance companies refuse to cover it, it may not get much traction at all.
Then, there is what happens after it gets in the hands of the prescribed public.
Once the drug is used in a non-trial setting, there could be more side effects and adverse reactions than anticipated and that could impact how well the drug is adopted. Also, Intercept could have been mistaken in its estimates of market size.
Maybe most importantly, Intercept [NASDAQ: ICPT] is not profitable. It never has been.
The company posted a net loss of over $309 million for fiscal year 2018. That was an improvement over FY17 when it posted a $360 million loss and FY2016 with a $412.8 million loss, but it has been a few years since Ocaliva hit the market and the company is still losing money.
While it does take a lot of money to develop all those drugs, if one (or several) of the ones in development fail to make it to the next level and ultimately commercialization, Intercept may struggle to recoup its losses. Plus, the company needs additional funding at the right terms to reach its goals. If it doesn’t get it, Intercept may not be able to function at all.
Intercept Pharmaceuticals Stock Prediction: The Bottom Line
Intercept has some promising drugs in the pipeline and an important collaboration agreement in place that will help the company access the Chinese market – but it also has some serious challenges. It may be worth your risk, but make sure that you understand Intercept’s business before you ante up.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.