Abbvie Hep C Drug Safety Warning Prompts Panic Selling, Totally Unjustified
ByAdam FeuersteinFollow | 10/22/15 - 03:50 PM EDT
Abbvie (ABBV - Get Report) shares plunged as much as 15% Thursday afternoon after U.S. regulators issued a safety warningtying its hepatitis C drugs to an increased risk of serious liver injury.
Investors are totally over-reacting to what might be a small hit to Abbvie's hepatitis C revenue.
That's because Abbvie's hepatitis C drugs Viekira Pak and Technivie are already not recommended or approved for hepatitis C patients with underlying, severe liver disease such as cirrhosis. Doctors shouldn't be prescribing the drugs to these advanced liver disease patients, yet some were apparently, resulting in severe liver injuries which were reported to the U.S. Food and Drug Administration. The result: Thursday's safety warning.
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Even if the FDA safety warning dents Viekira Pak and Technivie sales, the drugs only represent about 7% of Abbvie's total revenue. With so little revenue at risk, a $13 billion loss in Abbvie's market value is insanity.
Enanta Pharmaceuticals (ENTA - Get Report) helped develop some of the drugs used in Abbvie's hepatitis C regimens and receives royalties on sales. When the FDA safety warning hit, Enanta shares lost more than half their value. Again, investors are panic selling over a minor negative.
The new reality for biotech and drug stocks appears to be sell first, think second.
