AbbVie Exists – Now What?

AbbVie Exists – Now What?

January 4th, 2013 // 4:16 pm @ jmpickett

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It is now official – AbbVie exists. For those who may not recall, AbbVie is the so-called research-based pharma that has been spun off by Abbott Laboratories and features a portfolio of existing medicines, such as Humira and Synthroid, along with a pipeline of some 20 compounds in Phase II or Phase III development.

One question, though, is what kind of shelf life will AbbVie actually have? On one hand, there is Humira, a biologic that is approved to treat rheumatoid arthritis, psoriasis and Crohn’s disease, where the average treatment penetration rate is below 20 percent, notes Damien Conover, who heads pharma research at Morningstar, in an investor report today.

And Humira is a huge seller that is expected to generate some $10 billion in sales this year alone, reflecting the growth potential in those illnesses. And while patent protection expires in 2016, the medication is a complex biologic, suggesting the likelihood that generic rivals will appear immediately may not be high.

Then again, Abbott (ABT) – or AbbVie – is not taking any chances. Last year, the drugmaker petitioned the FDA not to approve any biosimilar for Humira on the grounds that the FDA would have no choice but to use trade secrets submitted to the agency when approval for Humira was first sought (back story). And recently, Pfizer won approval for its Xeljanz pill for RA (see this).

Meanwhile, AbbVie (ABBV) cardiovascular drugs – Tricor, Trilipix and Niaspan – represent 13 percent of sales and two of these face patent losses over the next two years, which Conover writes will create a drag on growth. And the pipeline, he adds, is “weak” and has a “heavy emphasis in the highly competitive hepatitis C market.” A protease inhibitor is expected to reach the market by 2014 or 2105 and generate between $1 billion and $2 billion in annual sales.

“Under Abbott’s umbrella, AbbVie didn’t create enough pipeline products both internally and through acquisitions to create the wide moat that many of AbbVie’s more diversified peers hold. The company’s relatively poor positioning is a concern,” he writes, adding this proves a challenge for AbbVie management (here is the pipeline).

He notes that AbbVie ceo Rick Gonzalez only recently led the drug group at Abbott starting in July 2010 after a brief retirement. His relatively “short tenure in the key field of drug commercialization and development is a concern.” So what should be expected? AbbVie will redeploy strong cash flows from Humira for acquisitions and partnerships, he posits.

Of course, another type of acquisition is always possible – perhaps another large drugmaker will want AbbVie. There will be plenty of speculation about this for some time. For their part, investors are undecided. On the first day of trading, AbbVie shares rose during first few hours, but then began to decline. Abbott stock, however, continued to show gains.