Bear of the Day: AbbVie Inc Slide Shows No Quick End (ABBV)

AbbVie Inc (ABBV) was big in the news this week after Federal regulators agreed to review a key patent for the anti-inflammatory drug Humira, knocking the stock down 3.5% on over three times the average volume of 9 million shares.

According to a story from Dow Jones on Tuesday by Anne Steele, the US Patent and Trademark Office’s Patent Trial and Appeal Board took up a petition by hopeful rival Coherus Biosciences Inc (CHRS) to look at AbbVie’s patent on a Humira dosing regimen to treat rheumatoid arthritis.

But ABBV shares were already pushed into the cellar of the Zacks Rank before this news because of a slide in earnings estimates over the past 30 days. Full-year 2106 profit projections fell from $5.00 to $4.77 and the 2017 consensus EPS estimate dropped from $5.99 to $5.73.

And that loss of earnings momentum is what makes ABBV today’s Bear of the Day by virtue of its Zacks #5 Rank (Strong Sell). This simply means that relative to over 4,000 other stocks across all sectors, ABBV has poor prospects for a price advance because of the magnitude and agreement of negative EPS revisions from analysts.

The Coherus Challenge is Real

Part of this action by analysts in the past month may have been in anticipation of the move by Federal patent authorities. Coherus management revealed at an investor conference in January that the company planned to file an application this year to market a biosimilar (generic) version of Humira.

On Tuesday, Coherus Chief Executive Denny Lanfear said they are “confident that this will lead to a final decision nullifying” the patent.

Shares Coherus shot up nearly 16% to $18.83 on very strong volume of 1.6 million shares, over five times their daily average.

AbbVie responded “we are confident in the validity of our patents and will vigorously defend them.”

“Humira is protected by many patents covering all aspects of its manufacture, formulation and indications, and the patents are the result of AbbVie’s investment in biologic innovation and the unique attributes of Humira,” a spokesperson said.

According to the Dow Jones article by Anne Steele, Humira was the second best-selling drug in the U.S. in 2015 and is AbbVie’s largest source of revenue.

AbbVie has also been preparing for this competitive battle by taking out about 70 patents for Humira, one of the largest patent portfolios ever assembled for a single drug.

Again from Steele, “The drug’s primary U.S. patent is due to expire in December, but AbbVie says the additional patents should keep copycat versions of Humira off the U.S. market until at least 2022, and possibly longer.”

Bottom Line for ABBV: Watch the Zacks Rank

While this patent battle could actually become a multi-year war, after today’s big news the analysts may continue to revise ABBV estimates downward. And that could keep it in the basement of the Zacks Rank for a while.

So if you are looking at big Biopharma stocks right now, check out Johnson & Johnson (JNJ), Pfizer Inc. (PFE), or Abbott Laboratories (ABT), all with a Zacks #2 Rank (Buy).

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.

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