FDA Approval of Amjevita Need Not Worry AbbVie Shareholders
- By Alberto Abaterusso
Another biosimilar to AbbVie's (ABBV) Humira (adalimumab) received approval from the FDA on Sept. 23. We are talking about Amgen's (AMGN) Amjevita (adalimumab-atto).
"As a biosimilar" to Humira, Amgen's new product is for the treatment of multiple inflammatory diseases:
Moderately to severely active rheumatoid arthritis.
Active psoriatic arthritis.
Active ankylosing spondylitis (an arthritis that affects the spine).
Moderately to severely active Crohn's disease.
Moderately to severely active ulcerative colitis.
Moderately to severe plaque psoriasis.
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The intrinsic value of ABBV
Amjevita is also indicated for moderately to severely active polyarticular juvenile idiopathic arthritis in patients 4 years old and older.
Since the news that Amjevita was approved by the FDA, AbbVie is down 51 cents or -0.78% on the New York Stock Exchange, signaling that AbbVie shareholders don't like the news because they see in the new biosimilar to Humira (the main product in AbbVie's portafolio) a threat to the company's revenues.
Source: Google Finance
Approximately 61% of AbbVie's total net revenues in 2015 came from the sale of Humira which is the company's largest product. The company closed its second-quarter and full-year 2015 reporting sales of $6.4 billion (up 17.7% year over year) and $22.9 billion (up 14.5% from 2014).
It is a matter of revenue and AbbVie's shareholders wonder whether doctors and hospitals will stay with the tried and proven long-established product or will switch to a new product just because it has been approved by the FDA.
Shareholders shouldn't be concerned about a decline in AbbVie's sales, at least until the company can prevent biosimilar competition, until 2022, and the reason is simple: If you carefully read the FDA's NR, you will notice that Amjevita (adalimumab-atto) received the approval "as a biosimilar" to Humira and not as an "interchangeable" product.
Between biosimilar and interchangeable there is a huge difference that maybe slips into many people's minds:
"There are two new types of biological products - biosimilar and interchangeable. Biosimilars are a type of biological product that are licensed (approved) by FDA because they are highly similar to an already FDA-approved biological product, known as the biological reference product (reference product) and have been shown to have no clinically meaningful differences from the reference product.
"An interchangeable biological product, in addition to meeting the biosimilarity standard, is expected to produce the same clinical result as the reference product in any given patient." - FDA
"No clinically meaningful differences" from the reference product means that Amjevita (adalimumab-atto) is not identical to Humira in terms of clinical results.
Being a biosimilar, before Amjevita (adalimumab-atto) becomes a well-known drug to doctors, specialists, hospitals, clinics, etc., it will take some time, maybe even years, for two reasons:
Doctors tend to prescribe the reference product and not the biosimilar. This is because doctors don't want patients to run a higher risk of developing side effects and/or obtain clinical results that are "similar" but not identical to the reference product (Humira). Consequently there will be, at least initially, fewer prescriptions and therefore fewer sales.
An interchangeable product, which is not the case with Amgen's product, can be switched to the reference product or take the place of the reference product during the medical therapy without leading to an increased risk of side effects compared to the reference product.
"The risk in terms of safety and effectiveness of alternating or switching between the interchangeable and the reference product is not greater than the risk of using the reference product without alternating or switching." - FDA
Being a biosimilar product, it will take some time before Amgen's product becomes a marketable product that may subtract from AbbVie's Humira market shares.
In the meantime the company is putting a lot of effort in its new drug pipeline Imbruvica, a cancer drug. Recently the U.S. FDA updated the Imbruvica(R) (ibrutinib) prescribing information (PI) to include new data from two Phase 3 trials supporting its expanded use in patients with chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL).
And two days ago AbbVie submitted a supplemental New Drug Application (sNDA) to the FDA for treatment of marginal zone lymphoma. If approved, it will be the fifth new treatment indication for the medication.
AbbVie's portfolio of medicines also includes AndroGel, Creon, Duodopa and Duopa, Kaletra, Lupron, Niaspan, Norvir, Sevoflurane, Synagis, Synthroid, TriCor and Trilipix, Viekira and Zemplar.
As of Sept. 27 the trailing price-earnings (P/E) was 18.62, the price-book (P/B) (mrq) was 18.65, and return on equity (ttm) was 102.66%.
Disclosure: I have no positions is AbbVie.
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This article first appeared on GuruFocus.
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The intrinsic value of ABBV
