AbbVie's Strong Next Generation Immunology Drugs Should Help Offset Humira Biosimilar Pressure

Sector Director

Damien Conover

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While AbbVie holds a strong portfolio of marketed and pipeline drugs, the increasing competition to the company's key drug Humira should slow the growth for the company. At close to 40% of total sales and a higher portion of earnings (due to higher margin revenue), Humira is a key determinant of AbbVie's earnings performance over the next three years. 

With approvals in rheumatoid arthritis, psoriasis, and Crohn's disease, Humira holds a wide range of indications, but biosimilar pressure will likely lead to declining sales over the next few years, and we expect U.S. biosimilar competition to accelerate declines in 2023. Also, branded competition will likely weigh on Humira's growth over the next several years. In particular, new JAK inhibitors and IL-17 and IL-23 antibodies represent major advancements in rheumatoid arthritis and psoriasis, which will likely lead to some market share losses for Humira. 

Offsetting Humira's expected declines, AbbVie looks well-positioned with next generation immunology drugs. In particular, recently launched drugs Skyrizi and Rinvoq have shown improved efficacy over Humira and other currently leading treatment options, which should support peak combined annual sales by 2032, close to Humira's 2022 sales. 

Beyond immunology, cancer drug Imbruvica is the next-biggest sales contributor. Imbruvica's strong clinical data in several forms of blood cancer should lead to peak sales above $4 billion, but increasing competition will likely cause declines over the next three years. Additionally, the acquisition of Allergan brings several new products, including Botox for both cosmetic and therapeutic uses. Botox's strong entrenchment bodes well for the treatment as new competition is emerging. Also, AbbVie holds several mature drugs with patent expirations long past, but with manufacturing or specific dosing complexities, which make generic competition less likely. 

Looking forward, AbbVie's pipeline is weighted more toward new cancer and immunology drugs. The company should be able to leverage its solid entrenchment with Humira and Imbruvica to launch the new drugs.

Business Strategy & Outlook

We believe AbbVie supports a narrow moat based on patent-protected drugs, intellectual intangibles, and a powerful salesforce. As is the case for most drug firms, the core of AbbVie's moat lies in its portfolio of patent-protected drugs. However, unlike AbbVie's Big Pharma peers, which tend to carry wide moats, one drug (Humira) represents the majority of AbbVie's sales (close to 40%) and profits (greater than 50%). As a result of both emerging branded competition to Humira in the immediate term and a potential U.S. generic biosimilar threat in the 2023 time frame, we believe excess returns are likely to persist for 10 years, but we cannot be as certain of this for our 20-year outlook, which would be needed for a wide-moat rating. While we do model in U.S. Humira sales declines in 2023, the rate of decline will likely be more gradual than a typical small molecule-branded drug facing generic competition, because of the complexities in developing and marketing a biosimilar (generic biologic).

Nevertheless, AbbVie derives enormous cash flows from its current product portfolio to fund ongoing discovery and development of the next generation of drugs. The large cash flows create an economy of scale that enables AbbVie to fund the average $800 million required for a new drug. While not as strong as other Big Pharma firms, AbbVie's R&D has created a database of intellectual insights that should help increase the odds of successful drug development. Finally, AbbVie's entrenched salesforce in one of the most sought-after therapeutic areas of immunology should help the firm launch its next generation of drugs and make the firm a leading candidate for smaller drug firms needing help to develop and commercialize innovative new drugs.

We think the company does face environmental, social, and governance, or ESG, risks, particularly related to potential U.S. drug price-related policy changes (75% of sales are generated in the U.S.) to increase access by lowering drug prices. Also, ongoing product governance issues (including litigation related to side effects and patents) also weigh on the firm. While we have factored these threats into our analysis, we don't see them as material to our moat rating.

Narrow

Economic Moat

AbbVie

AbbVie, Inc. is a research-based biopharmaceutical company, which engages in the development and sale of pharmaceutical products. It focuses on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology, and dermatology, oncology, including blood cancers, virology, hepatitis C virus (HCV) and human immunodeficiency virus (HIV), neurological disorders, such as Parkinson's, metabolic, comprising thyroid disease and complications associated with cystic fibrosis, pain associated with endometriosis, and other serious health conditions. The company was founded on October 19, 2011 and is headquartered in North Chicago, IL.

Earnings data Q1 2024

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Cerevel Therapeutics Holdings Inc

NEW ORLEANS--(BUSINESS WIRE)--Former Attorney General of Louisiana Charles C. Foti, Jr., Esq. and the law firm of Kahn Swick & Foti, LLC (“KSF”) are investigating the proposed sale of Cerevel Therapeutics (NasdaqCM: CERE) to AbbVie Inc. (NYSE: ABBV). Under the terms of the proposed transaction, shareholders of Cerevel will receive $45.00 in cash for each share of Cerevel that they own. KSF is seeking to determine whether this consideration and the process that led to it are adequate, or whe.

CEREVEL THERAPEUTICS INVESTOR ALERT by the Former Attorney General of Louisiana: Kahn Swick & Foti, LLC Investigates Adequacy of Price and Process in Proposed Sale of Cerevel Therapeutics - CERE

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Proposed acquisition adds robust pipeline of assets focused on best-in-class potential for psychiatric and neurological disorders where significant unmet needs remain Cerevel's clinical-stage pipeline complements AbbVie's current on-market portfolio and emerging neuroscience pipeline Emraclidine has the potential to transform the standard of care in schizophrenia and other psychiatric conditions Transaction valued at $45.00 per share in cash, for a total equity value of approximately $8.7 billion AbbVie to hold an investor conference call tomorrow, December 7, at 8:00 a.m. CT NORTH CHICAGO, Ill.

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NEW ORLEANS--(BUSINESS WIRE)--Former Attorney General of Louisiana Charles C. Foti, Jr., Esq. and the law firm of Kahn Swick & Foti, LLC (“KSF”) are investigating the proposed sale of ImmunoGen, Inc. (NasdaqGS: IMGN) to AbbVie Inc. (NYSE: ABBV). Under the terms of the proposed transaction, shareholders of ImmunoGen will receive $31.26 in cash for each share of ImmunoGen that they own. KSF is seeking to determine whether this consideration and the process that led to it are adequate, or whet.

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