AbbVie’s Downward Humira Guidance Worries Analysts

Decreasing Humira’s ex-US sales guidance for the second time in three months caught significant attention, as AbbVie now expects 30% revenue erosion for its top-seller outside its home market.

Much of the attention coming out of AbbVie Inc.'s earnings call Jan. 25 was focused on the company's reduction of ex-US revenue estimates for top-seller Humira (adalimumab) for the second time in recent months due to the impact of biosimilar competition – raising concerns that the impact of US biosimilars will be greater than AbbVie has suggested.

For the full year 2018, Humira grew 7.4% growth year-over-year to $19.94bn. Broken down, the autoimmune stalwart’s US sales of nearly $13.7bn represented 10.7% growth, while ex-US sales of $6.25bn increased just 0.6%. The fourth quarter numbers showed a starker difference, as Humira grew 9.1% domestically to $3.62bn, but declined 14.8% to $1.30bn outside the US.

Noting that “the event that has for many years concerned investors most has been the loss of exclusivity for Humira,” Chairman and CEO Rick Gonzalez said AbbVie now anticipates that ex-US sales erosion for the product may be as high as 30% this year. Before biosimilar adalimumab was introduced in Europe last October, AbbVie predicted near-term erosion of 18%-20%, but quickly increased its estimate of the damage during its third quarter earnings call to 26%-27%. (Also see "AbbVie Hit Harder By EU Humira Biosimilars Than Projected" - Scrip, 2 Nov, 2018.)

Biosimilar competition for Humira is not expected in the US until 2023. AbbVie finalized the latest of its patent settlements for Humira biosimilars on Jan. 25, allowing Coherus BioSciences Inc. to launch its adalimumab biosimilar (CHS-1420) on Dec. 15, 2023 – consistent with the timeline its used in six prior settlements on adalimumab copies. (Also see "Pfizer Decides Not To Challenge AbbVie's Humira Biosimilar Patents" - Pink Sheet, 1 Dec, 2018.) An outstanding dispute with Boehringer Ingelheim GMBH remains. (Also see "AbbVie Inks Sixth Humira Biosimilar Settlement, Battles Boehringer's 'Unclean Hands' Claim" - Pink Sheet, 8 Nov, 2018.)

Gonzalez reiterated AbbVie’s strategy for dealing with the Humira patent cliff by building up its successor biologics risankizumab and upadacitinib, under FDA review for psoriasis and rheumatoid arthritis, respectively, and by continuing to grow its hematologic cancer business with Imbruvica (ibrutinib), partnered with Johnson & Johnson, and Venclexta (venetoclax), partnered with Roche.

Some analysts find that strategy lacking, with Alex Arfaei of BMO Capital Markets insisting the company will need a major M&A transaction to change its fortunes past the introduction of US adalimumab biosimilars.

“As far as the appetite for a big deal, I can tell you that is not something that we are contemplating,” Gonzalez said.

Leading into the call, Arfaei wrote Jan. 24 that “the question on everyone’s mind” was whether AbbVie would pursue a merger with Bristol-Myers Squibb Co., possibly even in a hostile takeover scenario. Citing what he perceived as Bristol shareholder pushback on the pending acquisition of Celgene Corp., Arfaei wrote that this could create an opening for another entity to acquire Bristol and benefit from its leadership position in immuno-oncology, which could offer AbbVie significant diversification away from the autoimmune space. (Also see "Bristol Values Celgene's Hematology, Immunology Portfolio At $74bn, But Does It Price In Risk?" - Scrip, 3 Jan, 2019.)

Deals Bigger Than Pharmacyclics Unlikely

Gonzalez quickly dashed any such speculation, telling a questioner “as far as the appetite for a big deal, I can tell you that is not something that we are contemplating.” Further clarifying AbbVie’s current approach to business development, he called the 2015 acquisition of Pharmacyclics Inc. for roughly $20bn a major deal, albeit a bolt-on acquisition. [See Deal] To date, that deal has proven beneficial for AbbVie, as it brought Imbruvica to its portfolio, which totaled $3.59bn in global sales in 2018, up 40%, including fourth quarter growth of 42% to just over $1bn (including ex-US revenue sharing with J&J).

Prior to spinning out AbbVie, Abbott Laboratories Inc. gained Humira through its $6.9 bn acquisition of Knoll Pharmaceutical Co. in 2000, but AbbVie has been disappointed by some of its M&A gambits. [See Deal] It recently took a $4bn impairment charge related to its $5.8bn purchase of Stemcentrx Inc. in 2016 after multiple failed trials for the cancer candidate that drove that deal – rovalpituzumab tesirine (Rova-T). (Also see "AbbVie’s Business Development, Cancer Plans Not Put Off By Stemcentrx Disappointments" - Scrip, 10 Jan, 2019.) The pharma may prefer partnerships and licensing deals to add to its cancer portfolio, as exemplified by the anti-CD39 immunotherapy tie-up signed with Tizona Therapeutics Inc. on Jan. 4. (Also see "Tizona Lands AbbVie Cancer R&D Deal As New CEO Takes Control" - Scrip, 9 Jan, 2019.)

After the call, BMO’s Arfaei issued another note that conceded AbbVie’s position on large M&A, but asserted “given the magnitude of revenue pressure ahead, we expect AbbVie to be active in sizable business development.” The main part of that revenue pressure, of course, is Humira’s prospects going forward as the product still accounts for more than half of the company’s sales.

Gonzalez said AbbVie has planned for Humira sales erosion from day one of its existence, but that didn’t fully placate analysts or stockholders. (Also see "AbbVie Defends Humira With Aggressive Discount In First EU Tender " - Scrip, 1 Nov, 2018.) AbbVie finished the trading day Jan. 25 down 6.3% to $80.51 per share.

Wolfe Research analyst Tim Anderson warned that AbbVie’s second rapid revision of the impact of adalimumab biosimilar competition is worrisome for the pharma and reminiscent of how peer companies have responded to challenges to key franchise products. “AbbVie has revised down again its assumptions for EU biosimilar erosion – twice in a three-month window,” the analyst wrote in a Jan. 25 note.

“These revisions will make investors nervous that AbbVie is under-calling the long-term impact of biosimilar erosion, beyond 2019, including in the US (2023), where Humira currently generates the majority of its sales. These downward revisions also reconfirm a trend that we have often seen among big pharma management teams, not limited to AbbVie, i.e., underestimating the declines with big legacy franchise that start to roll over.”

Anderson cited GlaxoSmithKline PLC’s respiratory blockbuster Advair (fluticasone/formoterol) and Sanofi’s diabetes titan Lantus (insulin glargine) as examples of that trend.

Using Humira To Gain Formulary Access For Follow-Ons?

Morgan Stanley analyst David Risinger noted Jan. 25 that AbbVie’s US Humira sales growth guidance of 7% this year is below expectations; it would account for domestic sales of about $14.6bn, while consensus projections are roughly 3% higher at about $15.1bn, while Morgan Stanley expects 8% growth to $14.8bn. However, Risinger opined that with both risankizumab and upadacitinib likely to gain US approval this year, AbbVie may employ a rebate strategy with Humira to “garner strong formulary” access for both launches.

Risankizumab has an April 25 action date for psoriasis, while the action data for upadacitinib in RA has not been disclosed. The FDA filing was announced by AbbVie Dec. 20, meaning the regulatory decision likely would occur during the second half of 2019. (Also see "Keeping Track: US FDA Receives Submissions Galore As Year Ends" - Pink Sheet, 6 Jan, 2019.)

Although AbbVie tested 15 mg and 30 mg doses of upadacitinib in Phase II RA studies, its filing seeks approval of the lower dose. Analysts offered competing theories on why the lower dose was requested, with Leerink Partners Geoffrey Porges noting that several assays showed reduced selectivity for the JAK1 inhibitor at higher doses.

Morgan Stanley’s Risinger noted that the 15 mg dose proved only slightly less effective than 30 mg in RA and achieved superiority to Humira in the SELECT-COMPARE trial, which did not test the 30 mg dose. By contrast, competing JAK1 inhibitors now on the market – Pfizer Inc.’s Xeljanz (tofacitinib) and Eli Lilly & Co.’s Olumiant (baracitinib) – have not demonstrated superiority to Humira.

Pointing out that novel candidates for RA typically are subject of FDA advisory committee reviews, AbbVie President Michael Severino said it’s early in the review cycle, but that a panel review would not surprise AbbVie.

Referring to Severino’s recent promotion to president from heading R&D, one questioner asked Gonzalez to speak about a possible transition plan. “I've heard all the rumors about potentially me retiring,” the exec said. “I can tell you they are not true. As many of you probably know, I retired once and I can tell you I'm heck of a lot better at running AbbVie than I was at retirement.” Gonzalez retired from Abbott as president in 2007 and came out of retirement in 2009 ahead of the AbbVie spin-out.