Investment Thesis

Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT) is in the news once again. This time, an article alleges OCA, the company’s only commercialized drug, has become the subject of an FDA investigation related to its safety. The stock, once battered by the company’s failed attempt to make OCA the first FDA-approved therapy for NASH, has slumped to trade near a 52-week low last week. The article has made no revelation, and the newly-identified safety signal, under evaluation as part of the FDA’s routine post-marketing surveillance, is classified as only a “potential risk” whose link to the drug is yet to be established.

As Intercept refocuses on OCA in PBC, the reputational damage can further decelerate the sale growth, already under pressure from the pandemic-related slowdown in new patient starts. Though the company leads in NASH therapeutic development, the highly complex path for a regulatory signoff rules out any premium for the current forward price-to-sales multiple, which, even with my optimistic revenue forecasts for 2020, identifies a modest premium for the stock. With the margin of safety being hardly adequate to offset the sales as well as R&D uncertainty, my neutral view on the stock remains.

Intercept Pharmaceuticals_Ocaliva


Intercept Suffers a Double Whammy

Not even a week had passed since its previous regulatory hurdle when I last penned my article on Intercept in early July. The stock had crashed ~39.7%, posting the sharpest one-day drop following the announcement of the CRL (Complete Response Letter), which relates to the NDA (New Drug Application) the company filed for OCA (obeticholic acid/Ocaliva) for liver fibrosis due to NASH (nonalcoholic steatohepatitis). Despite the neutral rating on the stock, based largely on the uncertainty linked to the clinical development of liver therapies, I remained optimistic about the company’s prospects. After all, the FDA’s decision was based on

COVID-19-driven financial market volatility is expected to negatively impact solvency levels of Bahraini insurers this year, according to a new AM Best special report, adding to the challenges faced by the kingdom’s (re)insurance sector — the smallest among the Gulf Cooperation Council (GCC) countries.

The Best’s Special Report, “COVID-19 Adds to Challenges for Bahrain’s Fragmented Insurance Market,” notes the Bahraini (re)insurance market is very competitive, with a large number of companies vying for a limited amount of premium.

The report explains Bahraini insurers typically take more asset risk than their peers in mature markets. In particular, exposures to equities and real estate are generally higher among Bahraini insurers than among insurers in developed economies. As a result, their performance is heavily influenced by investment results and prone to volatility driven by financial market movements.

While the good solvency buffers of the large Bahraini insurance companies will allow them to absorb these types of financial market shocks, there is concern as to how insurers with lower solvency levels will cope with additional stresses in the short term, particularly in the event of a second wave of COVID-19 infections later in the year.

To access the full copy of this report, please visit

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Luca Patron
Financial Analyst
+44 20 7397 0304
[email protected]

Ghislain Le Cam, CFA, FRM
Director, Analytics
+44 20 7397 0268
[email protected]

Despite a relatively strong set of FQ1 numbers, I am concerned about the Conagra (NYSE:CAG) outlook on several fronts. Firstly, there will be some tough comparisons ahead as consumers eventually regain mobility, and the food at home tailwind fades. Secondly, I see the company’s low level of advertising reinvestment is negative for the future earnings outlook, especially with competitors stepping up investments in longer-term brand equity. At the current multiple, I don’t think CAG shares offer much in the way of long-term value.

Strong FQ1 Results Benefit from Packaged Food Tailwinds

CAG posted a better-than-expected set of FQ1 results, with EPS of $0.70 on the back of better-than-expected organic sales (+15.0%), significant gross margin expansion of c. 244 bps, and opex leverage.

Source: Conagra FQ1 Presentation Slides

The key to the quarter was continued demand for packaged foods through the pandemic, with retailer inventory restocking also providing a c. 600 bps benefit. The latter was reflected in Grocery & Snacks and Refrigerated & Frozen organic sales growth, which accelerated to +20.7% and 19.0%, respectively. Pricing trends also benefited from lower promotional activity in the quarter. On the other hand, foodservice trends remained under pressure, with organic sales down 20.3% due to lower away-from-home consumption.

Source: Conagra FQ1 Presentation Slides

While these are certainly very strong numbers, I do question the sustainability going forward. As both US retail segments were helped by a sizeable trade load that likely implies some front-loaded demand, I expect to see this reverse in the upcoming quarter. Additionally, top-line growth was also boosted by c. 70 bps from non-recurring trade accruals, implying a lower underlying growth trajectory.

Dissecting the Bottom-Line Strength

The bottom-line performance was also very commendable – gross margins reached 30.7%, above expectations on better volume leverage, and the trade spend accrual benefit. Meanwhile,

Dennis Dix is Chief Operating Officer at Cerity, an Austin-based data and analytics start-up offering workers’ compensation insurance.

Small-business fees for things like insurance and payroll services always eat away at the bottom line, but as the pandemic drags on, business owners should be increasing their awareness of how to keep these fees under control. Fortunately, several new-model services offer significant savings for businesses in the know.

Today, small businesses can take advantage of significant cost savings when processing payroll. Additionally, worker’s compensation insurance providers could potentially save business owners big money — with the right technology, no commissions and no upfront costs. 

The Future: Direct-To-Consumer Worker’s Compensation

Like never before, small business owners are learning, evaluating and making greater purchasing decisions completely online. As consumers themselves, owners’ expectations are higher. To be successful these days, insurers cannot simply rely on their domain expertise to attract buyers. Now, they must develop an intuitive and attractive user interface that guides users through an efficient process, requiring little data input.

Insurers that embrace a digital-first lens to the customer experience can gain traction with small business owners. For example, my company uses an “outside-in” methodology that offers direct-to-consumer access through a web-based questionnaire and process that can get small business worker’s compensation insurance coverage in as few as five minutes. The direct-to-consumer approach enables small businesses to save significant money by sidestepping traditional retail channels and removing the intermediary. This approach can enable leaders to focus on growing and scaling their operations while saving money.

Pay As You Go: The New Worker’s Compensation Model

“Pay as you go” is another way that small business owners take control of costs. The cost of worker’s compensation insurance (the premium) varies depending on the jurisdiction any given business is in, as well as

By Sonal Desai, Ph.D., Chief Investment Officer, Franklin Templeton Fixed Income

While the US economy has been staging a strong recovery from the COVID-19 pandemic, the challenge is far from over, says Franklin Templeton Fixed Income CIO Sonal Desai. She says the tug of war between the virus and the economy seems likely to continue until an effective vaccine is made available at scale.

The first stage of the US economic recovery has proved as strong as we expected – and more. Both the rebound in spending and the decline in unemployment have exceeded most analysts’ expectations. This owes, in part, to the timely and decisive fiscal support: while the economy was largely shut down, stimulus checks and enhanced unemployment benefits boosted personal savings to a record high. As some states and local governments began to reopen their economies in May, this stored-up financial firepower allowed households to unleash the substantial pent-up demand for goods and services accumulated during the weeks and months of lockdown.

The health of the recovery was soon tested by a second wave of contagion in July, when COVID-19 cases rose anew. The recovery showed an encouraging degree of resilience. The improvement in economic activity and employment slowed, but did not kick into reverse. The second pulse of our Franklin Templeton-Gallup Economics of Recovery study, conducted in early August, showed that Americans’ willingness to engage in different economic activities, from shopping to travelling to going back to their places of work, was not set back by the resurgence of contagion.1 Our study also highlights that a majority of Americans intend to keep increasing their savings over the coming months but not pay down debt: they remain prudent in the face of the health and economic uncertainty, but are again accumulating spending power to deploy once