Biotech Beat: Analysts Weigh In On Zafgen Inc (ZFGN) and Intercept Pharmaceuticals Inc (ICPT)

Never a dull moment in the volatile biotechnology sector as analysts remain bullish on Intercept Pharmaceuticals Inc (NASDAQ:ICPT) as the company prepares to launch a liver disease drug. On the other hand, some are moving to the sidelines of Zafgen Inc (NASDAQ:ZFGN) after the company reported a second patient death in the trial of its obesity-fighting pipeline drug.

Intercept Pharmaceuticals Inc

After Intercept provided details on plans for the commercialization of OCA in PBC, Liana Moussatos of Wedbush reiterated an Outperform rating on the biopharmaceutical company with a fair value estimate of $493.

Intercept has developed obeticholic acid, OCA, to treat primary biliary cirrhosis, PBC; a liver disease. Pending presumed approval, the drug will launch in the first half of 2016. Moussatos believes that Intercept is “well prepared for a successful commercial launch after the likely approval of OCA for PBC on or before the February 29th PDUFA,” or the date by which the FDA must announce the approval or rejection of the drug. She explains, “The Company’s initial commercial focus is on reaching patients that are most at risk for developing complications due to inadequate PBC control despite treatment with [the current standard of care]. We believe this approach targets the low hanging fruit as PBC can take time to diagnose and patients already being treated are relatively easy to identify.”

The analyst notes that approximately 50% of PBC patients currently have an inadequate response to the current standard of care. Intercept estimates that about 66,000 PBC patients around the world have uncontrolled PBC, all of whom are candidates for OCA. Moussatos anticipates “the potential announcement of an advisory committee meeting” for OCA in PBC in late 2015 or early 2016.

According to the 10 analysts polled by TipRanks in the last 3 months, 6 are bullish on Intercept, 2 are neutral, and 2 are bearish. The average 12-month price target for the stock is $326.40, marking a 106% potential upside from current levels.

Zafgen Inc

Simos Simeonidis of RBC Capital has downgraded shares of Zafgen from an Outperform to a Sector Perform rating and lowered the price target from $20 down to $7 after a second patient died while on beloranib in a clinical trial.

Zafgen has been developing beloranib, an obesity therapy that works to improve the balance between using and producing fat. The pipeline drug is currently being tested in patients with Prader-Willi syndrome; a genetic condition that can result in obesity. Simeonidis notes that there have been two deaths in the trial out of 83 patients. Although these numbers “are not high,” the analyst is “concerned about potential FDA action.” He continues, “We are still optimistic on the Phase III outcome (1Q16), but moving to sidelines on near-term volatility.”

The patient who died while enrolled in the trial was diagnosed with a “bilateral pulmonary emboli.” The analyst notes that the patient had “pre-exisiting history of thrombotic events, but had been screened and cleared to get back on the trial.” However regarding the future of the drug, Simeonidis comments, “We think that given that reality, it is likely that FDA may place the drug on clinical hold and wait for the Phase III data before making a decision on the fate of the drug’s development.” Going forward, the analyst is optimistic that the Phase III trial could be positive. However, the analyst does not “want to be in front of a potential negative FDA action, or any additional potential safety disclosures between now and Phase III data.”

According to the 6 analysts polled by TipRanks in the last 3 months, the vote on Zafgen is split as 3 analysts recommending buying the stock while the other 3 remain on the sidelines. The average 12-month price target for Zafgen is $15, marking a 149% potential upside from current levels.



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