The European Medicine Agency's Committee for Medicinal Products for Human Use (CHMP) recently adopted a positive opinion that recommended the approval of AbbVie's (ABBV 0.98%) Rinvoq for what would be its fifth indication in that market. This would be to treat patients with moderate-to-severe ulcerative colitis who had an inadequate response to conventional therapies or biologic agents.
A decision for Rinvoq as a treatment for moderate-to-severe ulcerative colitis patients from the European Commission is expected in the third quarter of this year. But what could that mean for the pharma stock AbbVie's sales? Let's check out the results from Rinvoq's phase 3 clinical trials and the European Union ulcerative colitis market to answer this question.
An impactful treatment option
Ulcerative colitis is a form of inflammatory bowel disease (IBD) that causes chronic inflammation and damage to the gastrointestinal (GI) tract. This differs from the other form of IBD called Crohn's disease in at least one major way: Ulcerative colitis is limited to the rectum and large intestine, whereas Crohn's disease can affect any part of the GI tract.
Ulcerative colitis impedes the ability of the digestive tract to properly process food/waste and absorb water. This results in symptoms such as weight loss, fatigue, and loss of appetite. The long-term complications of ulcerative colitis that isn't adequately treated include osteoporosis and anemia.
But there is a silver lining for patients who are experiencing moderate-to-severe cases of ulcerative colitis. The sheer size of the ulcerative colitis market has enticed many pharmaceutical companies to devote resources toward developing more treatments to improve outcomes for patients.
Rinvoq is a drug that has proven itself to be effective at assisting ulcerative colitis patients in treating their condition. What's the data behind my argument?
Patients in Rinvoq's phase 3 clinical trials with moderate-to-severe ulcerative colitis were randomized to either the treatment group of 15 milligrams (mg) or 30 mg once each day or the placebo group. Those patients assigned to the treatment group fared much better than those in the placebo group at achieving clinical remission -- characterized by few or no symptoms of ulcerative colitis.
The 42% and 52% clinical remission rates at week 52 of the treatment group far exceeded the 12% in the placebo group that also achieved clinical remission at week 52.
Image source: Getty Images.
A slight sales boost
Rinvoq looks like it could be a potent treatment option for moderate-to-severe ulcerative colitis patients. So, how much could an indication in the European Union bring in for AbbVie?
It's estimated that there are 3 million patients living with IBD in the European Union. Assuming the split between Crohn's disease and ulcerative colitis is similar to the United States, this implies that there are 1.4 million patients with ulcerative colitis in the European Union. If 21% to 22% of these patients have moderate-to-severe disease severity as is the case in the United States, this would be a patient pool of 298,000.
Anti-tumor necrosis factor (TNF) agents like AbbVie's Humira are the first-line treatment for patients with ulcerative colitis. But 60% to 70% of patients treated with anti-TNF agents don't improve or experience a relapse in their condition during the first year on anti-TNF agents. This creates a potentially eligible patient pool of 194,000 for Rinvoq.
Factoring in a 6% patient share, this is equivalent to nearly 12,000 patients. The annual list price for Rinvoq is $68,000 in the United States. Since drugs are approximately 50% cheaper in the European Union, I will use an annual list price of $34,000. Considering patient financial assistance programs and the bargaining power of health insurers to drive down the cost of treatments, I'll plug in an annual net price per patient of $25,000.
This works out to $300 million in annual sales potential for a moderate-to-severe ulcerative colitis indication in the European Union. Against the $59.6 billion in sales that analysts are expecting in 2022, the indication would provide a 0.5% bump in AbbVie's sales. Along with the $400 million annual sales potential of Rinvoq's ulcerative colitis indication in the United States, these approvals add up over time.
A safe, high-yielding dividend stock
AbbVie appears to be an interesting stock for income investors. This is because the Dividend King yields 3.7%, which is more than double the S&P 500 index's 1.6% dividend yield. And with a dividend payout ratio set to be around 40% in 2022, investors can rest assured that the stock will deliver many more years of dividend hikes moving forward.
