AbbVie Inc (ABBV) is the producer of Humira, the best-selling drug in the world in 2014, and certainly one of the top drugs of all time. In 2014, total sales for Humira were $12.5 billion; in 2015, sales were just over $14 billion.
Notably, Humira and several of the other top drugs, focus on autoimmune diseases, such as rheumatoid arthritis, Crohn’s, psoriasis and ulcerative colitis. All of these diseases are becoming more prominent as the massive baby boomer generation matures — this major trend has placed ABBV ahead of the pack.
Adding to its sales strength is the fact that Humira is in a new class of drugs called ‘biologics’, which means it’s made from animal proteins or bacteria. This makes the drug harder for generic firms to copy. And that’s a good thing, given that Humira comes off patent later this year.
ABBV also has broadened the uses for Humira across a number of autoimmune diseases, and will retain some patent protection in specific areas beyond 2016.
That said, AbbVie isn’t resting on its laurels. It is also moving aggressively into another highly profitable pharmaceutical area: Hepatitis C. Gilead Sciences, Inc. (GILD) is now the reigning champ in the HCV category, but ABBV is closing fast.
HCV treatment is extremely expensive — $84,000 to $94,000 for an 12-week treatment using GILD drugs — but it’s also 90% effective. Insurers are going along with the price since the alternative is paying for liver transplants and other chronic issues if the HCV is untreated. A liver transplant is more than $500,000 when considering necessary post-transplant procedures.
Good Fortunes for ABBV Ahead?
AbbVie is just about to enter the area with Viekira Pak: A once-daily HCV treatment that is said to slightly more effective than its competitor. Pricing will be competitive and it’s certain to gain market share.
Also, just in the past few days ABBV announced that it entered a strategic deal for marketing rights to two experimental psoriasis drugs produced by Boehringer Ingelheim Pharmaceuticals, Inc.
For one of the drugs that is entering phase III trials now, ABBV has paid $595 million up front for rights to sell it.
Both drugs are biologics and seem to take a novel approach to helping the body manage these autoimmune issues. And if they’re anywhere close to as effective as Humira, ABBV is going to dominate these categories for a long time to come.
The deal is very smart, since instead of competing with new contenders to Humira, it can gain market share in the space as Humira comes off patent. And given that it can cost up to $2 billion to take a drug through drug trials, getting a promising phase III candidate for a mere $595 million is a pretty good deal.
The psoriasis market was worth more than $30 billion in sales last year and given the increase in autoimmune diseases, this is going to be a strong market for decades to come. This is good news for ABBV stock, as the pharmaceutical company is well positioned to dominate.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.
