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Intercept Surges After Reporting Data for Liver Disease Drug

Stocks in this article: ICPT

NEW YORK (TheStreet) -- Shares of drug developer Intercept Pharmaceuticals (ICPT) are sharply higher after data from a trial of its liver disease drug OCA showed improved safety as well as a statistical benefit in reversing liver fibrosis.

WHAT'S NEW: In a regulatory filing last night, Intercept disclosed that the National Institute of Diabetes and Digestive and Kidney Diseases, or NIDDK, recently provided the company with a draft manuscript intended for publication that describes the results from the FLINT trial of the company's obeticholic acid, or OCA. The drug is being studied as a treatment for late stage nonalcoholic steatohepatitis, also known as NASH, which affects about 8M people in the U.S. each year and causes victims to die unless they receive liver transplants. The proportion of patients meeting the FLINT primary histological endpoint, defined as a decrease in the NAFLD Activity Score of at least two points with no worsening of fibrosis, was 46% in the OCA treatment group and 21% in the placebo treatment group, the draft manuscript stated.

WHAT'S NOTABLE: In late May, shares of Intercept Pharmaceuticals dropped following allegations that the company knew last January that the FLINT trial was halted partially due to patients' abnormal cholesterol levels, but did not disclose the information to investors.

ANALYST OPINION: Leerink analyst Joseph Schwartz upgraded shares of Intercept to Outperform from Market Perform after the company provided more detailed top-line FLINT data in its quarterly filing. The analyst said he was encouraged by the removal of the prior imbalance in serious adverse events and that the magnitude of adverse lipid changes was also less than expected. Schwartz increased his estimate that the drug will succeed in being approved as a NASH treatment to an 85% chance from a prior 60% chance and raised his price target on the stock to $445 from $270. Following the trial data, Citibank also issued a note to investors with positive commentary on Intercept. Citi analyst Jonathan Eckard said the biggest surprise in the disclosure was that the updated assessment of the safety data by the NIH, which concluded that there was not an imbalance of cardiovascular events. He viewed this as "a big win" that meaningfully improves the drug's regulatory path. Eckard added that physician sentiment on the drug's potential for fibrosis benefit were very low and he expects that the trial results will cause a "significant shift" in the outlook for OCA among doctors. Citi maintain its Buy rating and $693 price target on shares of Intercept.

ANOTHER TO WATCH: Conatus Pharmaceuticals initiated a Phase 2 trial of its own drug, emricasan, in patients with NAFLD including patients with NASH in March and expects top-line results from the Phase 2 trial in the second half of 2014.

PRICE ACTION: In early trading, shares of Intercept advanced $70.65, or 29.79%, to $307.92, while Conatus gained 36c, or 4.78%, to $7.90.

Reporting by Jason Keil.

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