On Dec. 16, the U.S. Food and Drug Administration (FDA) gave AbbVie's (ABBV -2.04%) Vraylar the go-ahead as an adjunctive (add-on) treatment for patients with major depressive disorder (MDD).
What was the clinical data behind the FDA's decision to award Vraylar with its fourth indication? And what could this news mean for the pharmaceutical company's financial future? Let's take a look at the results from Vraylar's phase 3 clinical trial and at the U.S. MDD market to find out.
Another treatment now for a common condition
MDD is a prevalent mental health disorder. It is estimated that 10.4% of Americans experience the condition in any given year, and that the lifetime prevalence in the U.S is 20.6%.
The diagnostic criteria for clinical depression are outlined by the fifth edition of The Diagnostic and Statistical Manual of Mental Disorders (DSM). At least five of the eight symptoms of the malady must occur for two weeks or longer to be diagnosed with clinical depression. These symptoms include, but aren't limited to: a depressed mood, a loss of pleasure in activities, a decrease in physical activity, fatigue, feelings of worthlessness, and an inability to concentrate.
These symptoms can adversely impact a patient's quality of life. Perhaps it's no surprise then that economists believe depression cost the U.S. economy a staggering $326 billion in 2020 alone.
And while antidepressant medications can be helpful in treating clinical depression, the success rate of a single therapy is only around 50%. Fortunately, this is where adjunctive treatments such as Vraylar could become effective options for healthcare providers and their patients.
Patients with MDD were enrolled in two phase 3 clinical trials. In both, they received a combination of antidepressant therapy and either 1.5 milligrams Vraylar daily, 3 mg Vraylar daily, or placebo. The primary endpoint in the study was a healthcare-professional-administered score known as the Montgomery-Åsberg Depression Rating Scale.
Surprisingly, patients taking the lower (1.5 mg) dose of Vraylar experienced a statistically significant improvement in that phase 3 clinical trial at week six, but the 3 mg dose of Vraylar didn't help patients achieve statistically significant improvement. In the other study, neither the 1.5 mg nor 3mg dose helped patients reach a statistically significant improvement in the MADRS score.
Even with these results, Vraylar did at least do much better than placebo therapy in both clinical trials. This is why it could still be a decent adjunctive treatment to add to the options that already exist.
Image source: Getty Images.
How much difference to the bottom line?
Vraylar could be a difference maker for countless MDD patients. But how much of a difference could it make for AbbVie's top line?
MDD impacts 19 million people in the U.S., and potentially up to half of this market could benefit from an add-on therapy. But the mixed results of Vraylar in its clinical trials could make it difficult for the drug to stand out from the crowded MDD adjunctive therapy market. There are already many available treatments, such as Abilify, Rexulti, and Seroquel XR.
However, none of these treatments works for everyone. This is why I believe that Vraylar could conservatively net 100,000 patients in this crowded market. The drug's annual list price is approximately $16,500 in the U.S. But with financial assistance and downward adjustments in the price by health insurers, almost nobody ends up paying nearly this much, so I'll use a net annual price per patient of $4,000. Thus, the MDD indication for Vraylar could add $400 million in annual revenue for AbbVie.
Stacked up against the $58.3 billion revenue base that analysts expect for the drugmaker in 2022, this would be just a 0.7% lift. But it could be roughly a 20% boost to the $2 billion in revenue that AbbVie is expected to announce that Vraylar generated in 2022. This would be a nice boost for a drug that's already generating double-digit percentage revenue growth for the company.
AbbVie is at a buyable valuation
AbbVie will face headwinds this year stemming from the U.S. patent expiration of Humira. The good news is that the company has almost five-dozen compounds currently in different stages of clinical development for numerous indications. As more new drugs are launched and the initial brunt of the revenue decline from Humira is absorbed, AbbVie should return to solid growth in a few years.
The company's forward price-to-earnings ratio of 13 is moderately below the drug manufacturing industry's average of 15.3. Taking AbbVie's fundamentals into consideration, the stock still looks like a smart buy.
