Market Overreacts to Intercept Pharmaceutical Letter

We are maintaining our $205 fair value estimate for

We believe the market is being overly sensitive to the contents of this letter. OCA is a bile acid analog, meaning that similar to naturally occurring bile acids, it is circulated from the liver to intestines. In highly compromised livers--the most advanced stages of cirrhosis--the circulation of bile acids is disrupted and leads to toxic buildup in the liver. Given this phenomenon where more of the drug is accumulated in the liver than in noncompromised liver situations, Intercept recommends more gradual and less frequent dosing for the most advanced PBC patients (specifically, those with Child-Pugh B and C staging). These represent a very small proportion of PBC patients (less than 5% by Intercept’s estimates), but because some doctors were incorrectly dosing with the wrong schedule, Intercept issued the letter to highlight the protocol outlined in its label. Considering the small PBC patient population to which this situation applies and no indication for label changes, our outlook for OCA in PBC is unchanged.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.