AbbVie Inc (NYSE:ABBV) has risen more than 20% since it hit the market earlier this year. In fact, it has managed to beat the S&P 500 by nearly 10%. It pays a hefty dividend with a yield north of 3.5% and wields the world’s most successful drug in Humira. Of course, investors are well aware that although Humira made up half of the company’s sales last year, the party is bound to end in the next few years as generic competition encroaches on AbbVie Inc (NYSE:ABBV)’s market share. The long-term picture looks promising, but how will investors get there? Here are three things that will move Abbvie stock for better or worse.
1. Pipeline news
This seems a bit obvious, but large-cap pharmas rarely hinge on every approval and rejection. I think that is a possibility for AbbVie Inc (NYSE:ABBV) as Humira’s expiration dates — 2016 in the United States and 2018 in Europe — draw closer. The drug will still continue to grow for the next several years. In fact, this year it is expected to become just the second drug ever (behind Lipitor from Pfizer Inc. (NYSE:PFE)) to eclipse $10 billion in annual sales. That doesn’t give the company a free pass on pipeline developments, though.
AbbVie Inc (NYSE:ABBV) is planning on 15 major regulatory submissions from now through 2017. That gives plenty of potential to make up for declining sales from its major breadwinner, even knowing that some will likely fail. There are a few trials in particular that investors need to watch. One is the phase 3 SONAR trial for atrasentan being evaluated in diabetic nephropathy, which is kidney disease in patients with type 2 diabetes. Diabetic nephropathy is the leading cause of chronic kidney disease in the world, and nearly 40% of diabetics develop the condition, so there is a large need for innovation in the space.
Several drugs approved for the disease, including Cozaar from Merck & Co., Inc. (NYSE:MRK) and Avapro from Bristol-Myers Squibb and Sanofi, lost patent protection in recent years. That opens the door to the $2.35 billion market for new therapies being developed by AbbVie and Eli Lilly & Co. (NYSE:LLY). The latter is developing a transforming growth factor-beta monoclonal antibody as part of an impressive diabetes pipeline. The drug is in a phase 2 trial for the condition, although results are not expected until early 2015. That gives AbbVie Inc (NYSE:ABBV)’s drug a considerable lead; however, the two work in completely different ways.
2. Triple direct-acting antiviral (DAA)
AbbVie received breakthrough therapy designation from the Food and Drug Administration in May for its DAA combinational therapy after impressive phase 2b results showed hepatitis C response rates of 99% at 12 weeks and 96% at 24 weeks. The drug consists of a protease inhibitor, NS5A inhibitor, non-nucleoside polymerase inhibitor, and ritonavir. The triple-DAA combination (“triple” referring to the three inhibitors) is now being studied in a phase 3 trial with 2,000 patients who have hepatitis C genotype 1.
The company’s drug will compete in a suddenly competitive market for next generation hepatitis-C drugs, although it is trailing its peers. Johnson & Johnson (NYSE:JNJ) and Gilead Sciences, Inc. (NASDAQ:GILD) both expect to receive a response from the FDA later this year for their own drugs. Sofosbuvir from Gilead Sciences, Inc. (NASDAQ:GILD) is the clear favorite with a broad activity against various genotypes of hepatitis C. On the other hand, the therapies from Johnson & Johnson (NYSE:JNJ) and AbbVie Inc (NYSE:ABBV) only protect against genotype 1. Sofosbuvir is great news for patients, but could be bad news for its competitors.