Remember a year ago when Intercept Pharmaceuticals’ stock was flirting with $500?

That’s when the stock turned into a mega million winning lottery ticket for investors who purchased the shares at around $72 a few days earlier — or better yet, at $30.38 a couple of months before that.

Not to mention for company insiders, who held roughly 43% of the 13.4m outstanding shares at that time.

The catalyst for these exorbitant gains was the company’s liver-disease drug obeticholic acid, or OCA a product that mimics a naturally occurring human bile acid, and which performed unexpectedly well in a clinical trial.

The company has been developing OCA as a cure for several chronic liver diseases, including primary biliary cirrhosis (PBC), NASH and primary sclerosing cholangitis (PSC).

Now, one year later, OCA received “breakthrough therapy designation” from the U.S. Food and Drug Administration (FDA) for the treatment of patients with NASH.

“We are very pleased to have received breakthrough therapy designation for NASH with liver fibrosis, as it will enable us to work closely with FDA to finalize the design of our Phase 3 program,” said Mark Pruzanski, M.D., President and Chief Executive Officer of Intercept.

“This designation underscores a recognition of the urgent need to bring novel treatments to NASH patients who have developed liver fibrosis, which is expected to make this serious disease the leading cause for liver transplant in just the next few years. As a first-in-class FXR agonist, we believe OCA has the potential to be an important treatment option for patients with no currently approved medicines.”

The trouble is, however, that the stock is trading at close to 60% below last year’s high—even after an 18% gain following the FDA news.

This means that a lot of mega-millions have disappeared, not to mention the plain dollars lost by investors who purchased the stock close to $500.

ICPT key statistics as of 1/10/14

Market cap (intraday)

8.73B

Shares Outstanding

19.34M

%Held by insiders

42.7%

%Held by institutions

26.10%

Revenue

1.62M

Operating Cash Flow

-21.87M

Source:Yahoo.Finance.com

 

ICPT key statistics as of 1/30/15

Market cap (intraday)

4.28B

Shares Outstanding

21.36M

%Held by insiders

40.86%

%Held by institutions

26.10%

Revenue

1.70M

Operating Cash Flow

-66.02M

Source:Yahoo.Finance.com

Why such a subdued reaction to such positive news?

Perhaps, time has tamed investor expectations, as hype has been replaced by reason.

While the new drug has a great potential, it remains potential — until the company overcomes all the hurdles between the lab and the market place, where the medical and the economic effectiveness of the product will be demonstrated.

Investors who have been around Wall Street long enough remember what happened to Dendreon’s drug PROVENGE that received FDA approval a few years ago—and to the mega millions once gained.

 

,Contributor
Author Bio
I cover global markets, business and investment strategy.
I’m Professor and Chair of the Department of Economics at LIU Post in New York. I’ve published several articles in professional journals and magazines, including Barron’s, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singapore, European Management Review, Management International Review, and Journal of Risk and Insurance. I’ve have also published several books, including Collective Entrepreneurship, The Ten Golden Rules, WOM and Buzz Marketing, Business Strategy in a Semiglobal Economy, China’s Challenge: Imitation or Innovation in International Business, and New Emerging Japanese Economy: Opportunity and Strategy for World Business. I’ve traveled extensively throughout the world giving lectures and seminars for private and government organizations, including Beijing Academy of Social Science, Nagoya University, Tokyo Science University, Keimung University, University of Adelaide, Saint Gallen University, Duisburg University, University of Edinburgh, and Athens University of Economics and Business. Interests: Global markets, business, investment strategy, personal success.


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