Has the luster faded for AbbVie (NYSE:ABBV)?
The big pharma company ranked as the best performer among its peers in 2017, with an impressive gain of 54%. AbbVie started off 2018 great as well. However, disappointing results from a phase 2 clinical study of cancer drug Rova-T caused the stock to skid.
Still, AbbVie's top executives remain very optimistic about the company's prospects. AbbVie CEO Rick Gonzalez, CFO Bill Chase, and Chief Scientific Officer Michael Severino fielded questions about current products and key pipeline candidates at the Bank of America Merrill Lynch Health Care Conference on Wednesday. Here are five things they said that AbbVie investors will want to know.
1. Count on continued solid sales for Mavyret
When AbbVie reported its first-quarter results last month, new hepatitis C virus (HCV) drug Mavyret was the star of the show. The company posted $919 million in HCV revenue during the quarter, with most of that amount generated by Mavyret. But will Mavyret continue to perform so well? Rick Gonzalez thinks it will.
Gonzalez said the HCV market pretty much boils down to a one-on-one match-up between AbbVie and Gilead Sciences. That's exactly what Gilead's management team thinks also. He doesn't expect dramatic pricing changes going forward. Gonzalez also thinks Mavyret will hold on to the market share it's gained. And while the number of HCV patients will trend downward over time, he said there should still be enough for AbbVie's HCV drug to produce solid sales for years to come.
2. The threat to Imbruvica isn't a big worry
Imbruvica is a key component of AbbVie's growth strategy. But the drug has new competition from AstraZeneca's (NYSE:AZN) Calquence, which won FDA approval as a second-line treatment for mantle cell lymphoma (MCL) in October 2017. AbbVie's executives don't appear to be too worried about the threat from Calquence, though.
Gonzalez noted that around 60% of the new patients that are using Calquence didn't respond to treatment by Imbruvica, so they don't present a net decline in market share for AbbVie's drug. He also pointed out that first-to-market "innovator" cancer drugs like Imbruvica tend to hold on to most of their market share even with new rivals on the scene because physicians and patients get comfortable with the innovator drug.
3. Elagolix is moving forward as expected
Some investors might have been concerned when AbbVie announced in April that the FDA was pushing back its review of elagolix in treating endometriosis by three months. However, AbbVie Chief Scientific Officer Mike Severino said that the delay related to "a very straightforward request" by the FDA for additional information.
Severino added that AbbVie responded promptly to the FDA's request for more information, and that the company's review of the data was "reassuring" to the AbbVie team. He said elagolix is moving forward as expected. An approval decision on the drug is anticipated in 2018 Q3. Rick Gonzalez stated that AbbVie is planning for a relatively slow initial ramp-up of sales assuming the drug is approved, because there will be a need for educating the market about the new treatment for endometriosis.
4. Upadacitinib shouldn't face the challenges that baricitinib has
Eli Lilly (NYSE:LLY) and Incyte (NASDAQ:INCY) didn't succeed on their first attempt last year to win approval for JAK inhibitor baricitinib in treating rheumatoid arthritis. The two companies regrouped to resubmit for approval of the drug but received mixed results in April from an FDA advisory committee, which recommended approval for a lower dose of baricitinib, but not the higher dose of the drug.
Should AbbVie be worried that its own JAK inhibitor, upadacitinib, could face similar challenges? Severino said the company "feels good about the position" it's in with upadacitinib. He pointed out that in unblinded results for upadacitinib so far, there hasn't been an imbalance in venous thromboembolic events (VTEs) or a pattern of platelet elevations. Severino maintained that "there are important differences" between AbbVie's drug and baricitinib.
5. The market overreacted to the Rova-T setback
AbbVie's management team didn't talk much about the clinical setback for Rova-T. However, Gonzalez did state that the company felt that the market overreacted to the news. And AbbVie put money on the line based on that belief.
Gonzalez said AbbVie accelerated the timing of a $10 billion stock buyback that was originally intended to extend over a two-to-three year period. This stock repurchase is a component of what Gonzalez referred to as AbbVie's second-highest priority in capital deployment: returning cash to shareholders. The other component in that priority, of course, is paying dividends.
What's AbbVie's top priority for its capital? Investing back into the business. Based on Gonzalez's comments, though, investors probably shouldn't expect any major acquisitions anytime soon. Gonzalez said that "valuations are pretty high right now." He added that the company isn't in a position where it must pick up additional late-stage assets. Don't completely rule out a big deal, though: Gonzalez stated that "if we find the right assets, you will see us move forward on those."
Keith Speights owns shares of AbbVie and Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short May 2018 $85 calls on Gilead Sciences. The Motley Fool has a disclosure policy.