Intercept (ICPT) Q3 Earnings Preview: What's in the Cards?

Intercept Pharmaceuticals, Inc.ICPT is scheduled to report third-quarter 2016 results on Nov 3, before market opens.

In the last reported quarter, the company recorded a positive surprise of 16.49%. Let's see how things are shaping up for this announcement.

Factors at Play

Intercept's top line comprises fees derived from collaborative agreements for the development and commercialization of its pipeline candidates. Such agreements should continue driving the company's top line in to be reported quarter.

In the second quarter, Intercept received a major boost with the FDA approval (in May 2016) of its lead drug, Ocaliva, in combination with ursodeoxycholic (UDCA), for the treatment of primary biliary cholangitis (PBC) in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA. The company generated first product sales in last quarter. In the third quarter, the product should contribute substantially to the company's top line.

Recently, the European Medicines Authority's (EMA) Committee for Medicinal Products for Human Use (CHMP) has recommended a conditional approval of Ocaliva. A final decision on the approval status should be out by 2016 end. Moreover, the company has filed a New Drug Submission to Health Canada for a marketing approval of Ocaliva, in combination with UDCA, for the treatment of PBC. In its upcoming conference call, we expect the company to shed more light on the regulatory status.

Meanwhile, Ocaliva is being evaluated for other indications including nonalcoholic steatohepatitis (NASH) and primary sclerosing cholangitis (PSC).

In its last conference call, the company narrowed its operating expenses to the low end of the previously guided range of $360 million to $400 million.

We expect investors to focus on the company's performance, sales ramp-up of newly launched Ocaliva and pipeline updates on Intercept's third-quarter call.

Surprise History

Intercept's track record has been decent so far, with the company surpassing expectations in three of the last four quarters. The company has posted an average positive earnings surprise of 7.13% over this period.

INTERCEPT PHARM Price and EPS Surprise


What Our Model Indicates

Our proven model does not conclusively show 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) to be able to beat estimates. But that is not 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 -12.37%. This is because the Most Accurate Estimate stands at a loss of $4.18, while the current Zacks Consensus Estimate is pegged at a loss of $3.72. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

Zacks Rank: Intercept carries a Zacks Rank #2, which when combined with its negative ESP, makes surprise prediction difficult this quarter.

Note that we caution against stocks with Zacks Ranks #4 or #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Stocks That Warrant a Look

Here are a couple of health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for Zoetis Inc. ZTS is +2.17% and it carries a Zacks Rank #3. The company is slated to release third-quarter results on Nov 2.

Infinity Pharmaceuticals, Inc. INFI is scheduled to release third-quarter results on Nov 3 after market closes. The company has an Earnings ESP of is +5.81% and it sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Tesaro, Inc. TSRO is scheduled to report third-quarter results on Nov 3 after market the closes. It has an Earnings ESP of +2.08% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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