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AbbVie (ABBV) Shares Down So Far This Year: Here's Why

Zacks Equity Research

AbbVie, Inc. ABBV stock has declined 20.8% this year so far against an increase of 2.9% recorded by the industry.

A couple of pipeline setbacks as well as erosion of sales of its blockbuster drug Humira in EU due to biosimilar launches hurt the stock this year despite several regulatory approvals and pipeline successes. Importantly, its proposed acquisition of Botox maker Allergan AGN last month did not go down well with investors as AbbVie’s stock declined thereafter.

AbbVie’s rationale behind the deal was to add a new blockbuster product to its portfolio, Allergan’s Botox, as its own blockbuster drug, Humira faces patent expiration. Humira generics are already denting revenues in Europe. Moreover, biosimilars are expected to be launched in the United States in 2023. AbbVie is heavily dependent on Humira and is looking to diversify its portfolio. Approved for therapeutic and aesthetic use, Botox is a key top-line driver for Allergan and AbbVie feels it could be the next revenue driver for AbbVie after Humira loses exclusivity. The acquisition is expected to close by early 2020, if all necessary approvals are obtained.

However, investors have their doubts as far as necessary approvals are concerned although the lack of overlapping products abates anticompetitive concerns. Some investors expressed concerns that AbbVie has overpaid for Botox as new competitive pressure loomslarge.

In February 2019, Evolus, Inc.’s EOLS Jeuveau injection, indicated to improve the appearance of glabellar or frown lines, was approved by the FDA, which can pose competition to Botox. Revance Therapeutics, Inc. RVNC is also developing RT002, a rival treatment to Botox for the frown lines indication, which has demonstrated longer duration of efficacy compared to Botox in late-stage studies.

Meanwhile, AbbVie faced a couple of major pipeline setbacks this year/late last year, which hurt stock price.

In early December, AbbVie stopped enrolment in a late-stage study, TAHOE, evaluating its cancer candidate rovalpituzumab tesirine or Rova-T in second-line small cell lung cancer (SCLC). In March 2018, Rova-T fell short of expectations in a phase II TRINITY study evaluating it in third line or later SCLC. Rova-T was added to AbbVie’s portfolio following the $5.8 billion acquisition of Stemcentrx in June 2016. The failure of TRINITY and the clinical hold on TAHOE raised skepticism about Rova-T’s potential and has brought into question the viability of the Stemcentrx deal. 

In March 2019, the FDA placed a partial clinical hold on all studies evaluating Venclexta for the treatment of multiple myeloma. The decision was taken after, in the ongoing phase III BELLINI study, a higher proportion of deaths were observed in the Venclexta arm compared to the control arm of the study. Though, in June, the partial clinical hold placed on CANOVA phase III study was lifted, all other multiple myeloma studies on Venclexta remain on partial clinical hold. In May, a phase III study evaluating AbbVie’s pipeline candidate, depatuxizumab mafodotin (Depatux-M) failed to show any survival benefit in patients with newly diagnosed glioblastoma, an aggressive form of brain cancer. Enrollment has been stopped in all ongoing Depatux-M studies.

Though Humira has been performing well based on strong demand trends, direct biosimilar competition in Europe is eroding international revenues from the drug significantly. Several companies have made biosimilar versions of Humira. In the United States, per settlements with seven manufacturers, Humira biosimilars are expected to be launched in 2023. With Humira accounting for around 61% of AbbVie’s sales, the entry of biosimilars would have a huge impact on the company’s financials.

Nonetheless, AbbVie has been successful in expanding approvals for its cancer drugs, Imbruvica and Venclexta. AbbVie has an impressive late-stage pipeline comprising several products with multibillion-dollar potential expected to be launched in the near term. Key recent FDA approvals include that of Orilissa (elagolix) for management of pain associated with endometriosis, a common gynecologic disorder, in July 2018 and Skyrizi (risankizumab) for plaque psoriasis in April 2019. AbbVie estimates that both the drugs have multi-billion dollar sales potential.

Another important pipeline candidate is upadacitinib, which is under review in the United States (PDUFA date: third quarter of 2019) and EU for rheumatoid arthritis and in late-stage studies for Crohn’s disease, psoriatic arthritis, ulcerative colitis, atopic dermatitis and giant cell arteritis. Risankizumab and upadacitinib have demonstrated differentiated clinical profiles versus Humira and are on track for launch in 2019.

AbbVie currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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