Flip to the 2012 financial results for AbbVie (ABBV -1.03%) and you'll see that its best-selling drug, Humira, brought in $9.27 billion in 2012, or 51% of the company's total revenue. AndroGel, soon to be the second-best-selling drug, reeled in just $1.19 billion in sales. First place never seemed so far away.
Such an eye-popping dependence on one drug gives investors the right to be concerned about AbbVie's susceptibility to volatility. Humira may have double-digit growth ahead of it for 2013, but most of the gains are expected to offset declines from other top drugs. Do investors own the right to hit the panic button?
Humira hubris?
Obviously, investors aren't mad at AbbVie for wielding a $10 billion product. Think about it -- the drug provides most of the cash flow for the dividend and supports a massive chunk of the company's market cap. But investors shouldn't blame the company indirectly for the immunology drug's wild success either. Consider that even if AndroGel tripled its sales next year (just for argument's sake) Humira would still outsell it three to one. Translation: a\Any number looks small compared to $10 billion.
To illustrate that point further, let's try another fun experiment. If we take the top drugs of other big pharma companies out of their lineup and insert Humira, they, too, would have been overwhelmingly dependent on the drug in 2012. For instance, Bristol-Myers Squibb (BMY -0.27%) would have depended on Humira for 38.5% of its sales if we swapped out Abilify.
|
Company |
Top-selling drug, % of total 2012 sales |
Humira swap, % of total 2012 sales |
No. 2 drug, % of total 2012 sales |
|---|---|---|---|
|
Bristol Myers Squibb |
Abilify, $2.83 billion, 16% |
$9.27 billion, 38.5% |
Sustiva, 6.35% |
|
Johnson & Johnson (JNJ -0.69%) |
Remicade, $6.14 billion, 24% |
$9.27 billion, 36.5% |
Velcade, 5.92% |
|
Merck (MRK 0.10%) |
Januvia/Janumet, $5.74 billion, 14% |
$9.27 billion, 26.6% |
Zetia, 7.36% |
Source: Company earnings releases. Note: Last column accounts for Humira swap.
This isn't meant to bring the other companies down; it's just meant to be a simple way to illustrate that Humira would pose similar challenges to others pharmaceutical firms. I'll be honest; I don't know much about Bristol, but Johnson & Johnson and Merck have pretty robust product lineups and pipelines. So in terms of marketed drugs, AbbVie is at least one step below its peers. In fact, it is possible that the company will not have a blockbuster outside of Humira and AndroGel at the end of 2013. Ouch.
Pipeline to the rescue?
While I do believe the company has some intriguing molecules in the pipeline, most are still a few years away from the market. The company states that it plans to submit 15 major applications worldwide between 2013 and 2017. In January, CFO William Chase told investors that the company will focus on specialty segments (diseases with few medical options) that have less competition and higher margins.
Good news for sure, but the real question is whether Humira and AndroGel can hold up the fort in the meantime. Chase admitted that lost sales will merely be offset by growth in its two leading products and that the company expects to return to growth in 2015 when the pipeline bears marketable fruit.
