Wall Street can't look past AbbVie's Humira problem
- AbbVie took a hit Friday morning as its fourth quarter revenue and earnings per share missed Wall Street expectations due in part to greater-than-expected sales erosion of its top-seller Humira in Europe.
- Net revenue from the anti-inflammation drug totaled $4.9 billion, a less than 1% increase compared to the fourth quarter a year prior. While net Humira revenue was up 9.1% in the U.S., internationally sales declined 17.5% on a reported basis. AbbVie now faces biosimilar competition in markets that represent 75% of Humira's international sales.
- For 2019, the company expects biosimilar competition will cause about $2 billion worth of erosion, representing a roughly 30% decline to international Humira sales on an operational basis. Conversely, executives see the franchise growing 7%, or by about $1 billion, in the U.S.
The impact of Humira biosimilars has loomed over AbbVie for quite some time. The pharma has tried to prepare by beefing up its pipeline and maintaining strong patent defenses for Humira in the U.S.
Knowing rivals were inbound in Europe last fall, AbbVie studied the competitive effects copycat biologics had on other anti-TNF inhibitors like Remicade (infliximab) and Enbrel (etanercept).
But guesswork is hard. During AbbVie's third quarter earnings call, which came just weeks after the first Humira biosimilars hit European markets, execs admitted that discounting on the copycats was higher than what they had expected. They said too that Humira international sales were eroding to a higher degree, by about 26% to 27%, than previously forecasted — and cautioned further changes to that forecast were likely.
On Friday, those changes came to fruition as AbbVie predicted a 30% decline to international Humira sales for 2019. One analyst noted that with such a decline, U.S. Humira growth would need to be in the double-digits in 2020 for AbbVie to hit a longer-term goal of $21 billion in annual sales for the drug in that year. AbbVie also is trying to reach an operating margin of greater than 50% by 2020.
CEO Richard Gonzalez expressed confidence in the franchise's trajectory, despite the headwinds. Notably, U.S. Humira biosimilars aren't anticipated until 2023.
"We still feel confident in the overall long-term targets," he said. "Whether or not one product is slightly different than another, we'll see how that plays out."
Gonzalez later said AbbVie "is not a business that is driven to any great extent by pricing." Yet a good deal of Humira's recent rise has stemmed from price increases, which accounted for 43% of Humira's product revenue growth between 2014 and 2017, according to a Leerink analysis.
Elsewhere in immunology, AbbVie anticipates two drugs it believes could become blockbusters, risankizumab and upadacitinib, will gain approval this year. The company has an aggressive contracting strategy in place for both and intends to put in the necessary investment to carve out substantial market share.
"The logical strategy with these assets is to position them to be lead products in the marketplace," Gonzalez said. "We expect the uptake to be consistent with the profile of those assets."
It was clear from Friday's call that AbbVie expects to offset weaker ex.-U.S. Humira sales with its own drugs. When asked whether it would pursue big M&A, Gonzalez said that's "not something that we are contemplating." The response effectively quashed murmurs that AbbVie may consider putting in a hostile bid for Bristol-Myers Squibb before the pharma's acquisition of Celgene closes.
Outside of immunology, AbbVie predicts $5.1 billion from hematological oncology drugs, $3.3 billion from its hepatitis C business and $200 million from its endometriosis pain medication Orilissa (elagolix) in 2019.
AbbVie shares were down 4% at market's open Friday. They fell further by mid-morning, hovering around $80 apiece.
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