AbbVie Inc. (ABBV, Financial) is a pharmaceutical company that develops and markets therapies that address a range of diseases. It originated in 2013 as a spinoff of Abbott Laboratories.
The main medication in the company’s portfolio is Humira, the trade name under which adalimumab is marketed, a medication used for rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn's disease, ulcerative colitis, juvenile idiopathic arthritis, plaque psoriasis, hidradenitis suppurativa, uveitis and pediatric enthesitis-related arthritis (used in European Union only).
Humira is administered by subcutaneous injection.
The components of a Adalimumab-Humira pen:
Approximately 61% of AbbVie's total net revenues in 2015 came from the sale of Humira which is the company's largest product. The company closed its second-quarter and full-year 2015 reporting sales of $6.4 billion (+17.7% year over year) and $22.9 billion (+14.5% from 2014).
The medication is approved for usage in the U.S., Canada and Mexico (collectively, North America) and in the European Union.
Humira is also approved for more than 60 other markets including Japan, China, Brazil and Australia. Humira was introduced to the market in January 2003.
Because the patent covering adalimumab – which is sold under the trademark Humira – is expected to expire in the U.S. in December and in the majority of European Union countries in October 2018, investors are concerned that competition from biosimilars could blow up a huge share of the company’s revenue, but AbbVie CEO Rick Gonzalez has promised that the company can prevent biosimilar competition until 2022.
Amgen (AMGN, Financial), one of the biosimilar competitors, has already applied to market its biosimilar copy of Humira, called ABP501. A target action date is set for Sept. 25.
Investors rightly see AbbVie has a dilemma because the company can generate plenty of cash to sustain the dividend growth (the current dividend yield is 3.53%), but the risk of a sharp decline in sales represented by the patent expiration is huge.
However, investors are placing a lot of trust on the company’s management that is doing everything possible to protect Humira’s revenues until 2022. In the meantime the company is putting a lot of effort in its new drug pipeline Imbruvica, a cancer drug. Recently the U.S. FDA updated the Imbruvica® (ibrutinib) Prescribing Information (PI) to include new data from two Phase 3 trials supporting its expanded use in patients with chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL).
AbbVie’s portfolio of medicines also includes AndroGel, Creon, Duodopa and Duopa, Kaletra, Lupron, Niaspan, Norvir, Sevoflurane, Synagis, Synthroid, TriCor and Trilipix, Viekira and Zemplar.
At the moment the trailing P/E is 18.62, the price/book (mrq) is 18.63 and return on equity (ttm) is 102.66%.
Disclosure: I have no positions in AbbVie Inc.
Start a free seven-day trial of Premium Membership to GuruFocus.
