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Why Intercept Pharmaceuticals Will Likely Pull Back

Thursday - 6/20/2013, 3:34am  ET

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, biopharmaceutical company Intercept Pharmaceuticals has received an alarming one-star ranking.

With that in mind, let's take a closer look at Intercept and see what CAPS investors are saying about the stock right now.

Intercept facts

Headquarters (founded)

New York (2002)

Market Cap

$645.5 million

Industry

Biotechnology

Trailing-12-Month Revenue

$2.1 million

Management

Founder/CEO Mark Pruzanski
CFO Barbara Duncan

Trailing-12-Month Return on Capital

(48%)

Cash/Debt

$104.2 million / $0

Competitors

AstraZeneca
Salix Pharmaceuticals

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 67% of the 18 members who have rated Intercept believe the stock will underperform the S&P 500 going forward.

Earlier today, one of those Fools, All-Star zzlangerhans, tapped the stock's recent surge as particularly unsustainable:

Intercept's share price jumped from [$33] to [$38] ... apparently because the company was able to price their follow on offering at the market value of [$33]. I've seen stocks rise before after announcing dilution would come at market value, the mirror image of the plunge seen when the new shares are sold below market. The [S]treet interprets this as a vote of confidence by the book runners and their clients who will be buying the new shares. ...

Regardless of the pricing of the secondary, Intercept seems overvalued to me at these levels for reasons I've described previously. Intercept is developing obeticholic acid as a second-line therapy in primary biliary sclerosis for patients who have failed treatment with the standard of care ursodiol. There's no SPA for the trial, the trial endpoints do not seem to me to be rock solid, and topline data isn't expected until Q2 2014 at the earliest. There's no reason for the stock to be so volatile a year ahead of the next significant catalyst except for the desire of traders to use it as a football.

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This article was originally published as Why Intercept Pharmaceuticals Will Likely Pull Backon Fool.com

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