On Jan. 14, AbbVie's (ABBV -0.30%) Rinvoq received approval from the U.S. Food and Drug Administration (FDA) to treat adults and children at least 12 years old with moderate-to-severe atopic dermatitis (eczema) whose condition didn't respond to other medicines.
What led the FDA to approve Rinvoq for its third indication? And how much of a boost could this be for AbbVie's sales? Let's dig into the phase 3 clinical trial results and U.S. moderate-to-severe eczema market to find the answers to these two questions.
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Another solid treatment in the arsenal of healthcare professionals
According to Healthline, eczema is a chronic skin condition often expressed by patches of dry, inflamed, and itchy skin. It's thought that the disease is caused by excessive production of immune system cells that lead to inflammation. Eczema typically begins in early childhood and flares up from time to time.
Common first-line treatments for the condition include antihistamines and topical corticosteroids (TCS). Unfortunately, a majority of patients with moderate-to-severe eczema (55%) cannot control their eczema with their current treatment regimen. This can result in sleep issues and weigh on a patient's quality of life, which is why there's demand for more treatments for the disease.
Fortunately, more treatment options are making their way to the market. One of those treatments is Rinvoq, which was approved last August in the European Union to treat moderate-to-severe eczema. What data is there to support the approval in the EU and most recently in the U.S.?
Rinvoq funded a randomized clinical trial of 901 moderate-to-severe eczema patients. These patients were blindly assigned to either receive 15 milligrams of Rinvoq once daily with TCS, 30 milligrams of Rinvoq each day combined with TCS, or a placebo pill and TCS. The patients were followed over the course of a 16-week period. The more pronounced the reduction in the Eczema Area and Severity Index (EASI), the more effective a treatment was for eczema patients. The EASI is a clinical scale that measures eczema's severity and surface area. A 75% or greater improvement in the EASI is called EASI75, which is the best indication of whether a treatment is effective enough to be approved by regulatory agencies.
Patients taking TCS and the lower dose of Rinvoq were found to have reached at least 75% clearer skin, or EASI75, at a 65% rate at week 16, which was much higher than the 26% rate for the TCS and placebo group at week 16. Even more striking, 77% of patients receiving the higher dose of Rinvoq achieved EASI75 at week 16.
This news is huge for AbbVie's immunology segment
Rinvoq could be a powerful treatment for many patients with eczema. So, what could this mean for pharma stock AbbVie?
First, it's estimated that there are 6.6 million adults in the U.S. with moderate-to-severe eczema. For the sake of conservatism and sparse data being available, I won't include the population of U.S. adolescents with the disease.
Second, although 55% of moderate-to-severe eczema patients aren't satisfied with their treatment plan, I'll assume that approximately 20% of the patient pool could start Rinvoq. This works out to 1.3 million potential patients.
Third, Rinvoq has the benefit of being a pill, which helps patients avoid having to go into clinics and hospitals for injections to treat their condition. On the other hand, the convenience of Rinvoq could be at least partially offset by the fact that the drug is a Janus kinase inhibitor. Due to the increased risk of serious adverse events like blood clots, cancer, and major heart-related issues, the FDA could end up restricting patients to just the lower dose of Rinvoq for safety reasons.
Considering all of these factors, I believe that the drug could capture 6% of the market, or 79,000 patients.
Rinvoq has an annual list price of $68,000. Adjusting for patient assistance programs and negotiations from health insurers, I'll use $20,000 as the net annual price per patient. This equates to just under $1.6 billion in annual revenue potential.
Against the $59.8 billion in revenue that analysts are forecasting for AbbVie this year, this would be a nearly 3% boost to the company's overall revenue. An additional $1.6 billion in annual revenue for AbbVie would represent a 30%+ increase in the company's non-Humira immunology segment revenue over the nearly $4.6 billion in combined Skyrizi and Rinvoq revenue for last year.
A Dividend King to buy confidently
AbbVie's 8.5% increase in the dividends per share that it will pay out to shareholders in 2022 brings its dividend increase streak to 50 consecutive years -- including its time as part of Abbott Laboratories. This makes the stock a Dividend King.
AbbVie is trading at a forward price-to-earnings (P/E) ratio of 9.8, which is an appealing valuation considering that the stock's earnings are expected to grow 5% annually in the next five years. Investors can scoop up shares of AbbVie and its market-trouncing, steady 4.1% dividend yield on the cheap. That's what makes the stock an attractive option for income investors at the current $140 share price.
