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Shares of AbbVie
[NYSE:ABBV] have surged 38.13% from the low of $45.45 a share on October 22, to close on Thursday at $62.78 a share. The company reported its third-quarter earnings on October 30 with worldwide sales of $5.94 billion, up 18.4% year-over-year. On an operational basis, sales increased 26.2%, excluding a 7.8% unfavorable impact from foreign exchange rate fluctuations. Net profits were $1.24 billion, or $0.74 per share, up 144.9% year-over-year. Excluding non-recurring items, the company's adjusted earnings came in at $1.13 per share. Wall Street was expecting earnings of $1.07 per share on revenues of $5.89 billion.
Sales of Humira (adalimumab), a TNF inhibiting anti-inflammatory drug approved for diseases such as rheumatoid arthritis, psoriasis and
Crohn's, were $3.65 billion, up 12.1% year-on-year. Revenue from Humira is about 61.36% of AbbVie's total revenues. AbbVie said that any company seeking to market a biosimilar version of Humira will have to contend with an extensive patent estate, which the company intends to vigorously enforce. CEO Richard Gonzalez said, “We believe the litigation process and our intellectual property estate will protect Humira from biosimilar entry until 2022.” Humira has over 70 additional patents expiring between 2022 and 2034.
Due to the complexity of biologics, a product can only be made that is similar, but not identical, to the original drug. Depending upon its size and complexity, the price of biosimilars could just come in between 10% to 20% less than the cost of the branded manufacturer's drug. The living cells that produce biologic drugs, such as
Humira, can be sensitive to small changes in the manufacturing process. Abbvie said the company has 24 patents covering methods of manufacturing
Humira, and Humira compositions, resulting from those methods.
Sales of Imbruvica (ibrutinib), an orally-administered anticancer drug targeting B-cell malignancies, in the third-quarter were $304 million, up 184% from $107 million in the previous quarter, based on AbbVie's closing date of the Pharmacyclics acquisition on May 26. The drug is expected to surpass $12 billion in worldwide annual sales and become the next AbbVie mega-blockbuster. AbbVie has a profit-sharing arrangement with Johnson & Johnson
[NYSE:JNJ] when it acquired Imbruvica's developer, Pharmacyclics.
Imbruvica
(ibrutinib) is co-developed by Janssen Pharmaceutical Companies of J&J, and
Pharmacyclics, an AbbVie company. Janssen affiliates market Imbruvica in EMEA (Europe, Middle East and Africa) as well as the rest of the world, except for the United States, where Janssen Biotech, Inc. and Pharmacyclics LLC co-market it.
In mid-October, the U.S. Patent Trial and Appeal Board (PTAB) denied another petition by the Bass group associated with Hayman Capital Management hedge fund manager Kyle Bass, for an inter partes review (IPR) of a patent for Pharmacyclics Inc.'s cancer drug Imbruvica, saying it failed to establish it would likely succeed in showing the claims are unpatentable. According to FierceBiotech, the Bass group was questioning the '090 patent, which is a method patent for treating mantle cell lymphoma (MCL), a cancer that affects white blood cells known as lymphocytes.
Viekira Pak, a hepatitis C medication, logged sales of $469 million, up 21.82% from the $385 million reported in the previous quarter. AbbVie said on July 24 that the U.S. Food and Drug Administration (FDA) approved Technivie (ombitasvir, paritaprevir, and ritonavir tablets) in combination with ribavirin (RBV) for the treatment of adults with genotype 4 (GT4) chronic hepatitis C virus (HCV) infection, who do not have cirrhosis.
In late October, seven patients on Viekira Pak died after liver failure, prompting the FDA to send out a warning to doctors to monitor patients using Viekira Pak or Technivie for signs of worsening liver disease. Since then, the U.S. product inserts for Viekira Pak and Technivie have been updated from “not recommended in Child-Pugh B patients” to a contraindication in patients with Child-Pugh B cirrhosis. Viekira Pak’s label, approved by the FDA last year, had already said it wasn’t recommended for use in Child-Plug B patients or patients with serious liver disease.
Sales of Lupron, a prescription drug for treatments of advanced prostate cancer in men, endometriosis or fibroid tumors in women, and premature puberty in children, were $201 million, up 2.4% year-on-year. Sales of Synthroid, a prescription drug for treatments of hypothyroidism, an enlarged thyroid gland and thyroid cancer, were $93 million, down 14.6% year-on-year. Sales of Kaletra, an anti-human immunodeficiency virus (HIV) drug, and AndroGel were down 34.4% and 23.6% year-on-year, respectively.
Looking forward, AbbVie raised its guidance for 2015 and expects earnings in the range of $4.26 to $4.28 per share. Wall Street is expecting earnings of $4.25 per share on revenues of $23.09 billion.
Shares of ABBV are up 3.5%, recovering along with the biotech and healthcare sectors, since September 21 when U.S. presidential candidate Hillary Clinton sent the sectors tumbling when she went on a Twitter frenzy and sent out a tweet about “outrageous” price gouging by a pharmaceutical CEO and that she would reveal her own drug affordability plan. Many believe that Clinton's plan will not go anywhere since several items in her proposal would be very difficult to pass in Congress.
From our technical analysis, ABBV bounced off the bottom trendline support of the uptrend channel, at $45.45 a share on October 22. The stock is now about to break out the descending wedge chart pattern, with an after-breakout upper price target range of between $75.00 and $80.00 a share.
In a Bloomberg report, Evercore ISI analyst Umer Raffat said in his July 25 note that Allergan [NYSE:AGN] might be interested in buying Biogen [NASDAQ:BIIB] or AbbVie. Those deals might not be possible at this point, as Pfizer [NYSE:PFE] said last week that it is in talks to acquire Allergan. Unless, PFE changes its mind and decides to acquire Abbvie instead.
Deutsche Bank has a Buy rating on AbbVie stock and a price target of $85.00, citing that the addition of Imbruvica completely changes the growth profile of the company and helps EPS and revenues to grow continuously, despite potential biosimilar challenges starting in 2017.
Disclosure: Long Position ABBV, AGN and BIIB. No position in JNJ and
PFE. |
