Countdown To The Allergan Merger, And More From AbbVie’s Q4 Earnings
Executive Summary
Despite Humira’s ex-US sales erosion, AbbVie reports strong launches for Skyrizi and Rinvoq, continued growth for hematological oncology franchise, and boasts it has a thriving R&D engine.
AbbVie Inc.’s most pressing issue is of course the pending merger with Allergan PLC – valued at $63bn and expected to close before the end of the first quarter. While the topic was not front and center for AbbVie’s earnings call on 7 February, CEO Rick Gonzalez did use the occasion to remind investors about the diversification and synergies it expects from the transaction – and to underscore the strong foundations AbbVie has laid for future growth.
Detailing its sales and earnings from both the fourth quarter and full year 2019, AbbVie reported that its top-seller Humira (adalimumab) continues its domestic growth story while biosimilar competition outside the US took a significant cut of total sales. However, new products Skyrizi (risankizumab) and Rinvoq (upadacitinib) are off to solid launches, while the two-drug hematologic oncology franchise of Imbruvica (ibrutinib) and Venclexta (venetoclax) posted healthy growth in 2019. (Also see "Skyrizi Launch Skyrockets, Boosting AbbVie Hopes For Humira Successors" - Scrip, 1 Nov, 2019.) Line extensions for those four products along with several new molecular entities (NMEs) indicate AbbVie’s pipeline will yield further growth, execs asserted on the call.
Gonzalez said his goal for the combination with Allergan, announced last June, was to create a company that would be stronger going forward than AbbVie on its own, and do so with diversification of both therapeutic focus areas and payer mixes. (Also see "AbbVie Pounces On Chance To Buy Revenues In $63bn Mega-Deal For Allergan" - Scrip, 25 Jun, 2019.) “The combined business will have durable growth positions in eight different franchises and be able to drive strong growth,” he said.
After the merger closes, the resulting company’s four major franchises will be immunology, hematologic oncology, medical aesthetics and central nervous system/neurological disorders, with Allergan providing the critical mass for the latter two categories. He cited Allergan’s antipsychotic Vraylar (cariprazine) as a growth product expected to yield about $850m in 2019 sales with growth in the 70% range, and cited the recently approved acute migraine therapy Ubrelvy (ubrogepant) as “an important product over the long term.” (Also see "Allergan’s Botox Gains Continue, Pipeline Progresses Ahead Of AbbVie Merger" - Scrip, 5 Nov, 2019.)
“This is a [combined] business that will have excellent payer diversity and payer mix,” Gonzalez pointed out. “If you look at it as a percent of the global revenues, Medicare Part B will be about 2%, Medicare Part D will be about 16%, Medicaid will be about 3%, and cash pay will be about 10%. So, [that’s a] nice balance and security along the payer base. It will be a business that's driven by volume, not by price.”
Gonzalez said AbbVie has tracked Allergan’s performance through two quarters since the deal announcement and thinks Allergan has performed a little better than expected. He added that early projections of $2bn in synergies from the combination still seem viable and may be a cautious estimate.
Humira’s Ex-US Competition More Aggressive Than Anticipated
Much of AbbVie’s financial story for both the fourth quarter and full year was positive, but Humira sustained a 28% reduction in ex-US sales during 2019 due to biosimilar competition – and analysts are bracing for further erosion outside the US in 2020.
Humira brought in nearly $14.9bn domestically during 2019, up 8.6%, while ex-US sales totaled $4.3bn, down 31% when foreign exchange impacts are factored in. For the fourth quarter, US sales of just below $4bn were up 9.8%, but the rest-of-the-world total of $948m fell by 25.4%.
AbbVie had overall growth, driven by products such as Skyrizi and Imbruvica; product sales in the fourth quarter were slightly above $8.7bn, good for 5.3% growth compared to 2018. That would have been a growth rate of 11% if biosimilar impact on Humira was disregarded. Full-year adjusted net revenues of $33.3bn rose 2.7% in constant currencies, but the increase was 9.9% when factoring out Humira’s erosion ex-US.
Gonzalez said Humira biosimilars were priced more aggressively than AbbVie expected, but the drug still maintained about a two-thirds market share outside the US, including about 55% in countries that introduced biosimilars.
“What that means is we've obviously maintained a tail of about 55% of the Humira volume, … which is a pretty significant tail when you think about a product of the size of Humira,” Gonzalez asserted. “I think, overall, we feel good about how our strategy played out despite the fact that the biosimilar players were more aggressive.”
AbbVie expects to fare as well or better in the US when biosimilar adalimumab is expected to launch in 2023, he added, both because it has several years to build up Skyrizi and Rinvoq as successors but also because he thinks the product’s competitive position is stronger in the US. He conceded that Humira is likely to face even more biosimilar competitors at home than abroad and AbbVie expects aggressive pricing again. For 2020, AbbVie anticipates about 9% sales growth for Humira.
Soaring Launch For Skyrizi, Slower Entry For Rinvoq
AbbVie has spent many quarters hyping its follow-on immunology drugs, the IL-23 inhibitor Skyrizi, approved for psoriasis, and the JAK1 inhibitor Rinvoq, approved for rheumatoid arthritis – and spoke effusively about their market performance in 2019. (Also see "AbbVie’s Post-Humira Strategy Continues Taking Shape With Rinvoq Approval" - Scrip, 16 Aug, 2019.) Skyrizi posted full year sales of $355m – its $216m in the fourth quarter put the drug on nearly a $900m run rate, Gonzalez noted. Rinvoq brought in $47m for the year, $33m on the quarter, but those sales account for a gradual conversion of trial patients to commercial product, the company noted.
Skyrizi now holds roughly 25% of the US market for psoriasis, up from 20% in the previous quarter, while Rinvoq has grabbed 9% market share so far in RA. (Also see "AbbVie's Skyrizi Poised To Enter Packed Psoriasis Market" - Scrip, 4 Mar, 2019.) For 2020, AbbVie predicts the two will yield combined sales of $1.7bn ($1.2bn for Skyrizi), guidance Morningstar analyst Damien Conover called “achievable based on leading efficacy and favorable market positioning supported by AbbVie’s strong entrenchment with Humira in related indications.”
Gonzalez told the call AbbVie started out in 2013 with a primary goal “to develop next-generation assets that would be superior to Humira and other competitive alternatives within our key immunology disease areas. And as you have seen, Skyrizi and Rinvoq have demonstrated that type of performance across multiple clinical trials. Their successful launch trajectories demonstrate the value of these assets in two very large segments of immunology, which combined represent approximately 40% of US Humira revenues today.”
The company’s growth plans rely heavily on label expansions for both. In January, AbbVie reported head-to-head data for Skyrizi showing it provided better efficacy in moderate-to-severe plaque psoriasis compared to Novartis AG’s IL-17 blocker Cosentyx (secukinumab). (Also see "AbbVie’s Skyrizi Tops Novartis’s Cosentyx In Psoriasis Contest " - Scrip, 15 Jan, 2020.)
On 5 February, AbbVie unveiled successful Phase III data in psoriatic arthritis. AbbVie president Michael Severino told the call the firm plans to file Rinvoq for approval in psoriatic arthritis during the second quarter and anticipates approval in 2021; it also intends to file for approval in ankylosing spondylitis during the second half of 2020.
“Together, psoriatic arthritis and ankylosing spondylitis make up an important segment of the rheumatology market with global market sales of approximately $14bn,” the exec said.
And AbbVie has its sights set on expansion in dermatology. “Moderate-to-severe atopic dermatitis is a large market that we do not participate in today. And in the middle of this year, we expect to see Phase III data for Rinvoq in this indication,” he added.
Skyrizi, meanwhile, is expected to produce pivotal data in psoriatic arthritis and Crohn’s disease later this year, with regulatory submissions in 2021. Those indications represent a global market of $18bn, Severino said, and AbbVie believes Skyrizi and Rinvoq are producing data that suggest better clinical profiles than competitor drugs in several autoimmune indications.
“Together, we expect Skyrizi and Rinvoq to have full coverage across the major disease areas for which Humira is currently approved plus new areas such as atopic dermatitis,” he said. “With these two new medicines, AbbVie is well positioned to maintain its strong leadership in the $70bn global immunology market.”
Venclexta And Imbruvica Continue To Deliver In Oncology – What’s Next?
Gonzalez also hailed the performance of Imbruvica (partnered with Johnson & Johnson) and Venclexta (partnered with Roche), calling them a “major growth engine.” The two brought in a combined $1.55bn during the fourth quarter (nearly $1.3bn from Imbruvica), a 37% increase year-over-year. Full-year sales were nearly $5.5bn ($4.7bn for Imbruvica, $792m for Venclexta), up 39%.
SVB Leerink analyst Geoffrey Porges noted that Imbruvica’s main growth catalyst is continued uptake in first-line chronic lymphocytic leukemia (CLL). Venclexta, meanwhile, yielded 14% sequential growth compared to the third quarter.
Both products have been important growth drivers for AbbVie and a big part of its diversification story as Humira matured. Hematologic oncology is one of the therapeutic areas of focus post-merger, but the strategy for building that out in the near term will rely on line extensions for the two main brands.
AbbVie anticipates EU approval of Venclexta for first-line CLL this year, and a supplemental approval of Imbruvica plus rituximab in first-line CLL patients. The company expects to file for combination therapy with Imbruvica and Venclexta in relapsed/refractory mantle cell lymphoma and first-line CLL in 2021. Beyond that it is conducting Phase III label-expansion studies with Imbruvica, Venclexta or a combination of the two in 12 other cancer indications.
Executing on line extensions is something AbbVie excels at, but the firm has had other recent launches beyond the two hematology drugs and Skyrizi and Rinvoq – the hepatitis C combination therapy Mavyret (glecaprevir/pibrentasvir) and endometriosis therapy Orilissa (elagolix). All told, those six products totaled roughly $9bn in sales during 2019, Severino said. Line extensions for these products (except for Mavyret) are key to the company’s growth expectations for coming years, he added, while six NMEs are slated to produce proof-of-concept data in the next year or so. (Also see "AbbVie Spotlights Its Early-Stage R&D Pipeline" - Scrip, 1 May, 2019.)
The Phase III PARP inhibitor veliparib is scheduled for US regulatory submissions this year in ovarian and breast cancer and the Bcl-2 inhibitor navitoclax is being readied for filing in 2021 in relapsed/refractory myelofibrosis.
As for other NMEs, AbbVie has four assets slated to report proof-of-concept data this year – three in immunology and one in cancer. ABBV-3373 is a tumor necrosis factor/steroid antibody-drug conjugate and ABBV-599 is a combination of JAK1 inhibitor ABT-494 and BTK inhibitor ABBV-105; both are being studied in RA. The anti-CD40 ravagalimab (ABBV-323) is in Phase II for ulcerative colitis, and Teliso-V, a cMET antibody-drug conjugate, is being investigated in solid tumors.
AbbVie’s NME pipeline also includes 13 Phase I candidates expected to read out data this year or next, as well as five Phase II assets expected to read out in 2021.
Severino’s pipeline review was limited to AbbVie’s R&D candidates; Gonzalez said the company will give guidance inclusive of Allergan’s contributions after the merger closes. (Also see "AbbVie Will Use Allergan Revenue To Fund Combined Firm's Large R&D Pipeline" - Scrip, 27 Jun, 2019.)