Can AbbVie's Legacy Products Deliver Further Growth?

AbbVie is spending more than 16% of annual sales to develop new drugs that will lesson the drug maker's dependence on the rheumatoid arthritis drug Humira. Fortunately, the Chicago-based drug manufacturer has a stable of off-patent, legacy drugs that contribute sizable sales to this R&D effort.

Mar 27, 2014 at 6:30PM

AbbVie (NYSE:ABBV) is spending more than 16% of annual sales to develop a pipeline -- including promising treatments for multiple sclerosis, blood cancers, and hepatitis-C (across all patient types) -- with the goal of reducing its dependence on the blockbuster rheumatoid arthritis treatment Humira (56% of $18.7 billion in 2013 revenue) for continued organic growth. Fortunately, the Chicago-based drug manufacturer has a stable of off-patent, legacy drugs that contribute sizable sales to this R&D effort.

Levothyroxine, the active ingredient in the hypothyroidism drug Synthroid, degrades quickly with exposure to light, moisture, oxygen, and carbohydrate excipients. Consequently, manufacturing complexities combined with a very narrow dosing range makes for a winning formula: Though first introduced in the 1950's, AbbVie's Synthroid posted U.S. sales of $622 million in 2013, up 13% year on year.

Nonpatented barriers to entry
Pancreatic enzyme products (PEPs) aid in the digestion of meals in patients who have diseases affecting their pancreatic enzyme function, such as pancreatitis or cystic fibrosis. Although PEPs had been available over the counter in the U.S. for more than 70 years, the regulatory agency granted marketing exclusivity to AbbVie's PEP, called Creon, in 2009, citing concerns that quality (effectiveness) of some unregulated PEPs could not be assured. Creon sales climbed 17% last year to $412 million. 

Most of AbbVie's composition and manufacturing patents on Lupron Depot have expired, yet the intramuscular injection (given as palliative treatment in advanced prostate cancer) hasn't witnessed generic challenges -- again, due to the degree of difficulty in replicating the manufacturing process used to make the sustained-release microspheres containing the active ingredient, called leuprolide. Global sales of Lupron totaled $785 million last year.

Reformulation strategies
Reformulation strategies can breathe new life into off-patent, legacy drugs too: AbbVie's Duodopa, a treatment for Parkinson's (PD) sufferers in advanced stages of the debilitating neuromuscular disease, is nothing more than a new formulation of the current gold-standard PD treatment of levodopa/carbidopa in a gel form administered directly into the small intestine through a surgically placed intra-intestinal pump. Available in most European Union countries since 2005, this $175 million a year drug has been fast-tracked by U.S. health regulators. U.S. approval could bring in an additional $475 million in peak annual sales by 2020, according to industry estimates.

AbbVie's late-stage pipeline
Industry observers opine that AbbVie's late-stage pipeline could generate some $7 billion in sales by 2020 -- so any discussion of topline growth has to consider these major potential add-ons. This pipeline includes an oral, interferon-free hepatitis-C cocktail; ABT-199, a promising BLC-2 inhibitor (a regulator protein recognized as being critical to cell death) being studied in hematologic malignancies, including chronic lymphocytic leukemia; and an experimental new drug treatment offering multifactorial immunomodulatory effects for people with relapsing, remitting multiple sclerosis, called daclizumab.

Difficult pathway for the regulation and approval of follow-on biologics
Notwithstanding key risk factors involved in bringing to market new drugs, investors in AbbVie are reminded each quarterly earnings release of the continued importance of Humira to the drug maker's continuing success. Humira competes in a global arthritis treatment market expected to grow from $20.6 billion in 2010 sales to $38 billion by 2018, according to global analytics company GBI Research. Competitors include Johnson & Johnson's (NYSE:JNJ) Remicade and Amgen's (NASDAQ:AMGN) Enbrel, which delivered more than $7 billion and $4.5 billion in to their respective company coffers last year. 

Nonetheless, analysts believe that continued label (such as Uveitis – inflammation of the eye and the third leading-cause of blindness) and geographic expansion could translate into peak Humira sales of more than $13 billion by 2017 -- up from $10.6 billion in 2013 -- when a key composition of matter patent expires in the U.S for this rheumatoid arthritis treatment.

Given the problems generic drug makers have had in overcoming manufacturing obstacles of some of its small molecule, legacy products (way past patent expiration), sales of Humira may keep humming along even after losing market exclusivity too: Humira is a biologic -- manufactured from "living" cells, the monoclonal antibody called adalimumab. Recent FDA draft guidelines for biosimilar approvals in the U.S. will require -- in addition to bioequivalency data -- would-be drug makers of generic Humira to conduct efficacy trials (in order to demonstrate similarity (interchangeability) and immunogenicity). In total, the required investment in biosimilar manufacturing processes could cost between $250–$450 million, according to the National Institute of Health-making cost a prohibitive obstacle to all but the better capitalized generic companies.  

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Jun 12, 2015 at 5:01PM

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