Replies to post #187201 on Biotech Values

[jbog]

Kris Kade,

This is from the article

In December, AbbVie received Food and Drug Administration approval for Viekira Pak for the treatment of some hepatitis C cases. Viekira has potential to be the company’s first big hit since Humira. The drugs it competes against, Sovaldi, and its successor, Harvoni, both from Gilead Sciences (GILD), are known for remarkable effectiveness and sky-high prices—more than $1,000 a day for some patients. Gilead’s treatment is widely preferred by doctors because it requires fewer pills per day and has a potentially shorter treatment period, but both are effective, and AbbVie can take share by discounting. This past week, Gilead announced deeper-than-expected discounts for its hep-C medicines.

THAT LEAVES ABBVIE facing both a price war for Viekira and a patent cliff for Humira. Investors should nonetheless buy the shares because the long-term outlook is better than the headlines suggest.

Start with Humira. It’s still growing, modestly in the U.S. and faster overseas, on a combination of volume gains and price increases. Wall Street expects sales to peak in 2018 at $16.5 billion, up $4 billion from last year’s level, and to begin declining, starting with a drop to $16.1 billion in 2019. Deutsche Bank likes AbbVie but is considerably more bearish on Humira sales than the consensus; it sees sales peaking at $15.1 billion next year and falling to $11.4 billion by the early 2020s, when sales level off. That leaves an eventual $3.7 billion revenue gap between peak and trough Humira sales. AbbVie is expected to earn $7 billion, or $4.39 a share, on revenue of $22.8 billion in the fiscal year ending in December.

Viekira will help fill that gap before it appears. Its sales are estimated to total $2.6 billion this year versus next to nothing last year, and to peak at $3.4 billion next year before sliding back to $2.6 billion by 2019. Those are obviously estimates subject to change, but the big picture is promising. JPMorgan in a Thursday note wrote that despite Gilead’s discounting, it’s confident that AbbVie has a multibillion dollar hep-C business.