Intercept Pharmaceuticals, Inc. ICPT is scheduled to report third-quarter 2015 results on Nov 9 before the market opens.
Intercept has an unsatisfactory track record with the company missing estimates in all of the last four quarters. The company posted a negative average earnings surprise of 16.12% over the last four quarters. Let’s see how things are shaping up for this announcement.
Factors at Play in Q3
Since Intercept does not have any approved product in its portfolio, revenues mainly comprise fees derived from collaborative agreements for the development and commercialization of its pipeline candidates. In this scenario, investor focus will remain on pipeline updates.
Intercept’s lead candidate, obeticholic acid (OCA), is being developed for a variety of chronic liver diseases including primary biliary cirrhosis (PBC), non-alcoholic steatohepatitis (NASH), nonalcoholic fatty liver disease and primary sclerosing cholangitis.
The most advanced development program for OCA is for PBC. OCA is currently under priority review in the U.S. – the company is seeking approval for the use of OCA for the treatment of PBC patients who have not responded adequately to, or are unable to tolerate, ursodeoxycholic acid (UDCA), the only drug currently approved to treat PBC. A final decision from the FDA is expected by Feb 29, 2016.
Additionally, the company initiated a phase III trial on OCA in NASH patients with advanced liver fibrosis.
Operating expenses will continue increasing as the company works on building an infrastructure supporting its commercial and pipeline development efforts.
What Our Model Indicates
Our proven model shows that Intercept is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is the case here as you will see below:
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.54%. This is because the Most Accurate Estimate is a loss of $2.56 while the Zacks Consensus Estimate is a loss of $2.60.
Zacks Rank: Intercept carries a Zacks Rank #2, which when combined with a positive ESP, makes us fairly confident of the company beating estimates this season.
However, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks That Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and carries a Zacks Rank #3. The company is slated to release third-quarter results on Nov 9.
The Earnings ESP for Ignyta, Inc. RXDX is +21.88% and it carries a Zacks Rank #2. The company is expected to release results on Nov 9.
Alnylam Pharmaceuticals, Inc. ALNY has an Earnings ESP of +2.13% and carries a Zacks Rank #3. The company is slated to release third-quarter results on Nov 9.
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