Humira and the Dawn of AbbVie

By Brandy Betz - September 17, 2012 | Tickers: ABT, JNJ, PFE | 0 Comments

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An FDA advisory panel met late last month and recommended, with a 15-2 vote, approving Abbott Laboratories' (NYSE: ABT) bid to expand prescription indications for its rheumatoid arthritis drug Humira. The expansion would allow Humira to be prescribed for the treatment of ulcerative colitis, a type of irritable bowel disease that affects the colon and rectum. The FDA, which isn’t required to follow the panel’s advice, will give its decision before the end of the year – around the same time Abbott is expected to split into two companies.

As was announced last fall, Abbott plans to create a spinoff company, AbbVie, which will cover “research-based pharmaceuticals.” The Abbott name will continue and focus its attentions on diagnostics, nutritional supplements, and established pharmaceuticals that need less nurturing. According to details from Abbott’s JPMorgan Conference presentation from January, if the split had occurred prior to this year, the Abbott division would’ve had revenues exceeding $22 billion, with AbbVie coming in slightly behind with about $18 billion.  

Humira: AbbVie’s MVP

Humira would be poised as AbbVie’s MVP with or without the expansion approval. The drug already has six approved indications, including psoriasis and Crohn’s disease. The 2011 annual report showed how Humira outpaced the other research-based pharmaceuticals, both domestically and internationally.

Tricor and Niaspan fell off the patent cliff this year, which will cut into the long-term profits once outside companies create generic alternatives. That will leave Humira as the lone star, with an assist from AndroGel. Expanding Humira’s indications, and thus strengthening its market grip, is a huge priority for Abbott right now.

The Expansion’s Potential  

The expansion permission isn’t going to be a make or break issue for Humira’s sales. The market for ulcerative colitis is a small one in general and Humira is aimed at a smaller subset of that.

Pharma research firm Decision Resources estimates that the global ulcerative colitis drug market has limited growth in its future, predicting that revenues will only reach $3 billion by 2020 from the $1.7 billion made in 2010. Those aren’t figures that are going to support a lot of revenue growth, particularly with competition.

The patient pool starts with the 700,000 ulcerative colitis patients that exist in the United States, according to Abbott. Patients with minor symptoms could find lower risk treatments such as lifestyle changes and corticosteroids to be sufficient. Those with moderate to severe symptoms will still need to eliminate lower risk treatments before Humira can be attempted.

Humira won’t be the only “last resort” treatment available to treat severe symptoms. Remicade, from Johnson & Johnson (NYSE: JNJ), is already on the market. It has a similar risk profile to Humira but greater efficacy. Humira’s main advantage is that it can be self-injected by the patient while Remicade must be administered intravenously in a hospital setting. It’s possible that the FDA will deny Humira’s new indication if it considers efficacy vastly more important than convenience.

 Pfizer (NYSE: PFE) is developing its own entrant, the oral medication tofacitinib, which is currently in clinical trials. Tofacitinib is awaiting FDA application approval for rheumatoid arthritis but is in late-stage trials for ulcerative colitis. Those late-stage trials aren’t expected to finish until 2015, at which point Humira will be near its patent cliff.

Final Thoughts

AbbVie will come into creation off the back of a segment that had nearly $18 billion in annual sales with over $7 billion in operating income and 42% profit margins. This new stock will be worth a look, even if it will lack the diversity that the parent company had as a whole.

Humira will be vital for AbbVie but it faces the patent cliff in 2016. The current pipeline includes more than 20 medications in various phases seeking to treat conditions including Parkinson’s and multiple sclerosis.  It’s worth the time to compare the efficacies of each of the drugs in that line to already existing competitors, where applicable.

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