Intercept Pharmaceuticals sold the international rights to its liver-disease treatment, Ocaliva, for up to $450 million on Thursday, and ICPT stock soared.
RBC Capital Markets analyst Brian Abrahams applauded the deal, which is a "sizable amount for a company entering the day with a $480 million cap." Intercept will receive $405 million upfront from Advanz Pharma and an additional $45 million contingent payment.
The deal's implications can be read several ways, Abrahams said. Ocaliva is approved for patients with primary biliary cholangitis, an autoimmune condition that destroys bile ducts. But Intercept hopes to move into nonalcoholic steatohepatitis, or NASH. NASH is a progressive disease that often leads to liver failure.
"We believe the deal likely reflects management's confidence in continuing to pursue the NASH indication, based on its ongoing work," he said in a report.
On today's stock market, ICPT stock rocketed 21% to 19.59.
ICPT Stock: A 'Reasonably Good' Deal
Advanz Pharma is a U.K.-based focused on specialty and hospital pharmaceuticals in Europe.
It will pay $405 million to secure the rights to Ocaliva outside the U.S. If it wins pediatric orphan exclusivity — a measure that would bar generic rivals for a specific period of time — Advanz will pay Intercept another $45 million.
The company also agreed to pay Intercept future royalties on sales of Ocaliva in NASH.
RBC's Abrahams notes Ocaliva sales in Europe are growing modestly. The current rate puts sales at roughly $111 million for the year and around $505 million in aggregate over five years, he said. Given competitive concerns and intellectual property uncertainties, it's a "reasonably good" deal for Intercept, he said.
He kept his sector perform rating on ICPT stock, however.
Moving Into NASH Is Tricky
Expanding into NASH has proven tricky for Intercept and its rivals.
To gain U.S. approval, a company must show its treatment improves fibrosis of the liver while not worsening the symptoms of NASH. Or, the treatment can improve the symptoms of NASH, but patients' level of fibrosis cannot worsen. So far, that bar has flummoxed every effort.
The regulatory path forward in Europe could be even trickier, Abrahams said.
"Our initial take is that by monetizing a region with a more challenging NASH regulatory path, this provides Intercept with the capital to further pursue NASH in the U.S. —perhaps signifying confidence in its ongoing analyses," he said.
The news sent ICPT stock to its highest point since November.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
