Intercept Pharmaceuticals
Biotech stock Intercept Pharmaceuticals (NASDAQ:ICPT) is another intriguing short-squeeze candidate. Intercept had 7.24 million shares held short as of mid-March, which equates to nearly 26% of its float. The key here is that it only trades around 1.16 million shares per day. This implies that it would take more than six trading sessions for short-sellers to completely exit their positions if Intercept's stock moved sharply higher.
The potential for a squeeze is going to depend on experimental treatment obeticholic acid (OCA) for nonalcoholic steatohepatitis (NASH). NASH is a liver disease that affects up to 5% of the U.S. adult population, and can lead to fibrosis, cancer, or even death. It currently has no cure or therapies approved by the Food and Drug Administration.
On the bright side, OCA met one of its two co-primary endpoints in the late-stage Regenerate trial -- a statistically significant improvement in fibrosis without a worsening of NASH. On the other hand, the high (and most effective) dose led to increased instances of pruritus (itching) and considerably more trial dropouts than the placebo. The FDA sent Intercept a Complete Response Letter, requesting additional safety data on OCA.
With new trial data upcoming, Intercept could obliterate or affirm the short-sellers' thesis. Even if OCA is approved for a small subset of the sickest NASH patients, it could easily become a blockbuster in what's been deemed a $35 billion indication.
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