February 17, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Gilead Sciences had a tough year, based largely on its dropping sales of its hepatitis C (HCV) franchise. Sam Paul, writing for Seeking Alpha, discusses why AbbVie might be the next Gilead—or not.
Both companies are large-cap. AbbVie’s market cap is $98.84 billion and Gilead’s is $91.44 billion. Gilead is very dependent on Harvoni and Sovaldi for HCV, although it has a very solid HIV portfolio. Last year, 66 percent of AbbVie’s sales were from Humira, for autoimmune diseases.
Paul notes that Gilead has been something of a bad investment since mid-2015, writing, “If you had bought one share of Gilead at its all-time high on June 23, 2015, for $122, and had taken the dividend payouts and hid them under the mattress, your original investment would now be $72.50. The return on this investment would have been -40.57 percent. This exercise is to show that a solid dividend is great, but it’s difficult to see large gains if the principal of an investment shrinks.”
Is AbbVie in the same boat? Paul doesn’t think so. He notes that, “One of the problems with Gilead’s hepatitis C drugs are that they work!” Indeed, Gilead developed a cure for a disease, and as a result, the market for the drug grows smaller each year, a victim of its success. It’s also getting pressure from competitors.
Although Humira is AbbVie’s mainstay, how long can that last? The drug is potentially getting some competition from biosimilars. Paul writes, “I believe 2017 will not be a bad year for AbbVie. First, Humira will still be protected for at least the near future. Second, AbbVie has a solid drug portfolio which will boost further growth.”
Paul points to AbbVie’s “135 patent,” which “protects the [dosing] of 40 milligrams of the D2E7 antibody, active in Humira, every 13-15 days. The patent is supposed to expire in June 2022.” But it’s being discussed in court this week, and Paul and other analysts think the release of Humira biosimilars will be postponed for at least a little while.
Jeffrey Holford, an analysts with Jeffries, wrote, “We see the 135 patent as a blocking patent for all potential Humira biosimilars in the U.S., given that it is assumed that all biosimilars must be developed to be dosed at the same concentration and frequency.”
Many think biosimilars for Humira will hit the market by 2019. But if the current court cases swing the other way, it could happen earlier.
And AbbVie has Imbruvica and Venclexta. Imbruvica approved for its fifth major disease in January. It is a cancer drug. The most recent approval was for relapsed/refractory marginal zone lymphoma. AbbVie has projected Imbruvica global sales of $2.4 billion by the end of this year, an increase of 31 percent.
Venclexta was approved in April 2016. Venclextra is expected to bring in a relatively smaller amount, $125 million, this year. Paul writes, “This is a far riskier drug to hang your hat on, because AbbVie is banking on the fact that the FDA will give the drug a far wider market to target. At present, the available market is only an estimated $300 million, but hopefully that will expand with more approvals.” The drug is approved for chronic lymphocytic leukemia with 17p deletion.
Paul does not believe AbbVie is risk-free, however. “AbbVie may not be a great stock to purchase forever, but it’s a buy for 2017. Humira’s patent defense is stalwart and will hold up for the near term, and it will continue to be a cash dow.”
