It goes without saying that most publicly traded companies have suffered severe losses. However, one market segment that has weathered the storm relatively well is the pharmaceutical sector. Naturally, pharmaceuticals levered toward vaccinations have performed outstandingly in some cases. However, the trajectory of non-novel coronavirus related organizations, such as AbbVie (NYSE:ABBV) is less clear. For instance, ABBV stock is down conspicuously on a year-to-date basis.
Nevertheless, the Covid-19 pandemic has caught the world by surprise. In the ensuing race for a treatment, infectious disease experts are looking at all avenues. Therefore, we’ve witnessed a spike in the scientific research community testing drugs that have been repurposed to address the coronavirus. In the spotlight recently is AbbVie’s HIV medication Kaletra (Aluvia).
I know what you’re thinking: what does an HIV medication have to do with a virus that earlier, many people labeled as “just the flu?” It turns out that this repurposing effort has a very wide scope. As an example, I recently discussed the investment argument for AIM ImmunoTech (NYSEAMERICAN:AIM). While AIM’s flagship drug is Ampligen, which is used to treat various cancer-related symptoms, it may also have properties that can combat early onset Covid-19 symptoms.
As a result, AbbVie recently gave up its patent rights to Kaletra. This move helps ease medicinal supply chain headwinds, as well as counter accusations of profiteering. But will it be enough to help lift ABBV stock?
Before you get too excited, you should know that The New England Journal of Medicine performed a test on Kaletra. Long story short, it failed. While contrarian experts still hold hope for Kaletra, other factors cloud the narrative for ABBV stock.
Covid-19 to Impose Pressure on ABBV Stock
Cynically, I’d like to bring up the point that AbbVie giving up patent rights to Kaletra isn’t the most generous act in the world. Simply, the drug isn’t part of the top ten products that represent the company’s key revenue drivers.
However, I’ll give management this: it’s a great PR move, especially considering the flack that Gilead Sciences (NASDAQ:GILD) received. Also, if Kaletra turns out to be effective in some capacity against Covid-19, that’s a bonus for AbbVie. Still, I’m not entirely convinced on ABBV stock, even assuming Kaletra’s success.
That’s because AbbVie’s revenue drivers are drugs related to cancer, cancer-related functionality symptoms, or other serious conditions. To put it another way, in order for ABBV stock to move higher, this requires patients unfettered access to high-level medical care facilities.
Well, that’s kind of a problem in this environment. Moreover, my research indicates that states with the highest cases of new cancer patients tend to have the highest numbers of Covid-19 infections. Some states are especially problematic. For instance, New York has the third-highest rate of new cancer patients while being the global coronavirus epicenter. Its hospitals are already overwhelmed, which means cancer patients (or other serious-disease patients) must take a backseat.
Honestly, unless you were dying, would you risk going to a hospital or care clinic right now?
I realize that what I’m saying isn’t breaking new ground. But my overriding point is that the coronavirus isn’t disproportionately impacting a remote part of the U.S., say Alaska. Instead, it’s hitting major metropolises hard. As you would expect, these areas have large populations of cancer patients.
Sadly, these are the people that would most benefit from AbbVie’s lifesaving drugs. Without practical access, though, the investment case for ABBV stock is currently dubious.
Worst of Both Worlds
If I want to extend my logic out, I must say that ABBV stock is the worst of both worlds. First, you have the situation where Covid-19 has many unknowns. While Kaletra may offer promise, so do other competing pharmaceutical options.
Further on this point, I’m not sure if patients will readily accept repurposed drugs. Again, Kaletra is an HIV drug. Alternative solutions are originally geared for various cancers. Personally, I’d have to be in dire straits to accept HIV medication.
Second, a significant risk exists that cancer patients or those suffering from serious conditions will not have access to AbbVie’s treatments in time. For affected families, they may view this as an unnecessary human tragedy. Therefore, whatever PR gains that AbbVie earned via opening Kaletra up to competition may be undone following the coronavirus crisis.
Frankly, I view Covid-19 as the disease that AbbVie really didn’t need. For that reason, I’m staying on the sidelines regarding ABBV stock.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.