AbbVie (NYSE:ABBV) markets the planet's top-selling biotechnology drug, and the company's second-quarter results show no signs that Humira's sales pace is slowing.

That's good news for AbbVie, but investors are right to wonder whether the company's acquisition of Shire (NASDAQ:SHPG) prepares it for life beyond Humira when the drug loses patent protection at the end of 2016 and competitors such as Johnson & Johnson (NYSE:JNJ) battle for market share.

Source: AbbVie.

A bit of background
Humira won approval for use in rheumatoid arthritis patients in 2002 and has gone on to notch the FDA green light in a slate of autoimmune disorders including psoriasis and Crohn's disease.

Humira belongs to a class of drugs known as TNF inhibitors which work by disrupting the TNF protein associated with causing inflammatory disease.

Source: AbbVie

Humira is an injectable drug taken by the patient every other week at home via a specially designed pen. Since Humira doesn't cure inflammatory disease, patients must stay on the drug continuously for it to work.

The chronic nature of autoimmune disease, and Humira's ability to reduce pain-causing inflammation, have proven a boon to AbbVie and its investors. Humira leads this market, outpacing other biologic response modifying drugs including Amgen's Enbrel and Johnson & Johnson's Remicade and providing a degree of insulation against newer competitors like J&J's Simponi. 

By the numbers
Despite being a mature drug that has been available for more than a decade, Humira notched $3.3 billion in second-quarter sales, up 25% operationally from a year ago.

Sales in the U.S. jumped 36% and international sales climbed 16% (ex-currency) year over year in the quarter, bringing total sales for the first two quarters of 2014 to just shy of $6 billion, or 22% higher than last year.

As a result, Humira represents a whopping 67% of AbbVie's revenue for the quarter. While that's good news for investors today, it presents a big problem when Humira loses patent protection.

Source: AbbVie

Vying for the prize
Autoimmune drugs are among the best-selling pharmaceuticals in the world. Although Humira is the top-selling inflammatory drug, Enbrel and Remicade also generate billions in sales annually. For example, Enbrel and Remicade sales totaled $4.6 billion and $6.7 billion last year, respectively.

The sheer size of the market is attracting plenty of competitors hoping for their piece of the pie.

Johnson & Johnson bolstered its presence by launching Simponi in 2009, and the company won an FDA label expansion for Simponi Aria for moderate to severe rheumatoid arthritis in July 2013. As a result, Simponi's revenue surged 61% year over year to $282 million last quarter.

In 2012, Pfizer launched the twice-daily rheumatoid arthritis drug Xeljanz as an alternative to biologic modifiers like Humira. Despite a black-box warning, sales are growing quickly: In the first quarter, Pfizer reported $52 million in global Xeljanz sales, up from just $11 million the year before.

Most recently, Celgene won approval for its psoriatic arthritis drug, Otezla, in March. Otezla poses a challenge to Humira not only in psoriatic arthritis, but also in psoriasis. Celgene expects an FDA decision regarding Otezla's use in that indication in September.

On top of those threats, Novartis' Sandoz is already developing a biosimilar generic version of Humira it hopes to launch once Humira's patent expires. If Novartis is successful, Humira's sales will likely fall more quickly after it loses exclusivity. 

Moving the line
AbbVie isn't sitting stilin the face of these challenges. The company is ushering its own Humira successor, ALX-0061, through trials. AbbVie licensed ALX-0061 from Ablynx last fall; if the drug succeeds in mid- and late-stage trials it could offer rheumatoid arthritis patients a lower risk of infection and fewer annual injections than Humira.

AbbVie is also rushing to diversify. Its three-drug combination therapy for hepatitis C is awaiting a decision from regulators, and the company hopes that it can carve away some of the billions in sales being captured by Gilead's Sovaldi.

The company also recently launched a phase 3 trial of veliparib in HER2 negative BRCA mutated breast cancer patients. AbbVie also has late-stage veliparib studies under way in non-small cell lung cancer.

Through collaboration with Biogen Idec, AbbVie is developing daclizumab for relapsing multiple sclerosis. In addition, through collaboration with Bristol-Myers Squibb, AbbVie is studying elotuzumab as an adjunct therapy for use alongside Celgene's Revlimid in multiple myeloma.

Fool-worthy final thoughts
AbbVie's biggest announcement last quarter was its $54 billion deal to acquire Shire. Shire's ADHD and orphan drug business will diversify AbbVie's product line and give the newly combined company a far more tax-friendly mailing address.

Investors will need AbbVie to successfully launch new blockbuster compounds if they hope for their dividend to remain intact. A lower tax rate will certainly help. While there's no shortage of challenges facing AbbVie ahead of Humira's patent expiration, the company continues to ride high, at least for now.

 

Todd Campbell is long Gilead Sciences. Todd owns E.B. Capital Markets, LLC. E.B.Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Johnson & Johnson, Gilead Sciences, and Celgene. The Motley Fool owns shares of Gilead Sciences and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.