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Do These Pipeline Drugs Hold the Key to AbbVie's Future?

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You are likely aware that AbbVie (NYSE: ABBV  ) has generated an enormous chuck of its revenue in recent years from just one drug. Immunology megablockbuster Humira brought in $9.3 billion in sales in 2012 – or 51% of the company's total – and is expected to crack the rarified air north of $10 billion in 2013. AbbVie will continue to ride Humira, but each year that passes represents another year closer to the end.   

With Big Pharma in the midst of the patent cliff, it's easy for investors to turn their attention to Humira's eventual demise. Consider that Pfizer's (NYSE: PFE  ) Lipitor once had peak sales of over $13 billion, but only generated $584 million in its first full year without exclusivity. I've pointed out before that, historically speaking, biologics don't face as steep of a cliff after losing exclusivity. Nonetheless, investors have good reason to focus on AbbVie's pipeline. Especially given the new fleet of immunology drugs in development that may challenge their first generation predecessors. 

No pressure, kiddos
A quick look at the company's pipeline shows that there are 10 active phase 3 trials, a 30% focus on biologics, and 15 major worldwide submissions planned through 2017. AbbVie has the future of its immunology business pegged on two drugs with different approaches to the same diseases.

BT-061 is a monoclonal antibody (biologic) being developed with Biotest AG, while GLPG0634 is a selective JAK inhibitor (small molecule) being developed with Galapagos. Both are being evaluated in phase 2 trials for treating rheumatoid arthritis, while the biologic is also active in psoriasis trials. Before we get into the potential impacts of each, we need to look at what's at stake.

And you thought The Big Three played basketball  
A few weeks ago, I noted that the first three TNF-alpha inhibiting immunology drugs to be approved in the United States – Humira, Remicade from Johnson & Johnson (NYSE: JNJ  ) , and Enbrel from Amgen – set the standard for treating immune diseases. While competition would seem to be fierce, last year, each drug grew sales at least 12%, as the Big Three raked in $19.6 billion dollars total.  

Despite the incredible success of the group, next generation drugs are aiming for the cash pile. Johnson & Johnson's Stelara is a novel biologic being evaluated in various immunology indications and marks a significant improvement over first generation therapies. There is also an increasing awareness of the potential of JAK inhibitors such as Pfizer's Xeljanz, the first in its class to be approved for rheumatoid arthritis.

Science on their side
Should AbbVie's two drug hopefuls continue to impress in upcoming phase 3 trials, both could become major forces in the market. The science behind each molecule supports the optimism in the air. BT-061 works by inhibiting the CD4 protein, which acts as a crucial messenger for the immune in fighting diseases. Much like Stelara and Xeljanz, BT-061 is an upstream TNF-alpha inhibitor -- although each has a unique mechanism of action.

The same goes for GLPG0634, which is a novel JAK inhibitor. Whereas Xeljanz has been shown to inhibit JAK3 -- one of the four proteins in the JAK family -- AbbVie and Galapagos believe that their therapy targets only JAK1. The high selectivity has the companies thinking that the drug could be one of the safest on the market. In fact, a recent phase 2a trial showed results that were near the best ever achieved in a rheumatoid arthritis study. Like, ever. 

There's no denying that the company is in dire need of new products. Four of its seven major products brought in less revenue in 2012 than in 2011, while AndroGel -- the second best-selling product -- is a long way from Humira, with just $1.15 billion in sales. Looking around the industry, it wouldn't be far-fetched to think that both of the immunology drugs above will become blockbusters if approved. That would be much easier should they eventually get the nod for multiple indications. 

Foolish bottom line
Now, the science is on your side until it isn't: unexpected events can always happen. One of the major reasons contributing to the continued dominance of the Big Three is their long-term safety profile. Doctors have elected to stick with the proven therapies rather than jeopardize their patients with a new, less-proven hotshot. In many cases, new drugs also have to be approved as a first-line treatment. Companies have been playing it safe with developmental drugs, often targeting patients who have failed other treatments for initial approvals. 

Nonetheless, a shift is under way as more effective next generation drugs challenge the status quo. The trend worth is keeping an eye on for AbbVie investors, who may be left wondering what the future holds once the company's golden goose, Humira, is cooked. The Fool's brand new premium report on the company answers the high-profile questions that AbbVie investors are asking, and as an added bonus, you'll receive a full year of free analyst updates as significant news hits. Simply click here now to claim your copy today.


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