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Could the World's Top-Selling Drug Be Toppled?

By Keith Speights - Dec 15, 2014 at 8:44AM

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A long-feared, low-cost alternative to Humira makes its debut. Is there trouble ahead for AbbVie?

You might not have heard it, but a warning shot was just fired over the bow of the world's biggest-selling drug.

AbbVie's ( ABBV 1.69% ) Humira generated sales of nearly $10.7 billion in 2013, securing it the No. 1 spot among all prescription drugs sold. However, last week brought news of the entrance of a new rival. Could Humira be in jeopardy of losing its place at the top?

Source: AbbVie 

Low-cost alternative
Cadila Healthcare Ltd. announced on Dec. 9 the launch in India of a biosimilar version of Humira. The new drug, which will be marketed under the name Exemptia, will cost $200 per vial. Humira is priced five times higher.

This marks the first Humira biosimilar to reach the market. If Cadila was only focused on the Indian market, AbbVie wouldn't have much to worry about. However, that's not the case. According to Reuters, Cadila plans to expand into the U.S. market as soon as 2019. 

With the U.S patent for Humira expiring in 2016, and the European patent for the drug expiring in 2018, AbbVie knew that the day would eventually come for competition from biosimilars. However, the company had hoped that the complexity of creating a biosimilar version of Humira combined with tough regulatory hurdles would keep a moat in place for a long time after those patents expired. 

Still, though, Cadila is only hoping to enter the U.S. market in 2019. That's more than four years away -- and there's no guarantee that the Indian drugmaker will be able to hit that date. AbbVie won't lose too much sleep over the risk of Humira losing its top spot to Exemptia anytime soon.

A more immediate threat
Humira could be toppled from its No. 1 perch in the not too distant future, however. The more immediate threat comes from another drug that doesn't compete against Humira but could present a big challenge for AbbVie's overall success.

Sovaldi. Source: Gilead Sciences 

Gilead Sciences ( GILD -0.16% ) appears to be on track to at least come close to toppling Humira with its hepatitis-C drug Sovaldi. During the first nine months of 2014, Sovaldi generated revenue of over $8.5 billion. Sales for Humira came in just shy of $9.2 million for the same period.

Sovaldi's successor, Harvoni, might have an even better shot at capturing the lead from Humira. Harvoni combines Sovaldi with another Gilead drug, ledipasvir, in a single-pill regimen that doesn't require the patient to also take interferon. 

AbbVie expects its own hepatitis-C combo to receive FDA approval soon. If the company prices its product below the hefty $94,500 cost of a 12-week regimen for Harvoni, payers could give their own nods of approval to AbbVie. However, Harvoni presents a formidable opponent with its convenience and efficacy.

Warning signs?
Do potential threats to Humira's ranking lessen AbbVie's attractiveness as an investment option? For now, the answer is a resounding no. 

Granted, the blockbuster drug accounts for nearly two-thirds of AbbVie's total sales. If Humira's sales dropped, AbbVie would feel the pain. But they're not declining. Instead, Humira's revenue increased almost 18% year over year last quarter. The launch of a biosimilar in India isn't going to make a dent in this momentum. 

And even if Gilead continues its dominance with Sovaldi and Harvoni (which it probably will), AbbVie should experience a fair share of success in the hep-C market. There's room for multiple products to rake in big bucks.

Over a longer horizon, AbbVie's future is a bit murky. Eventual competition from biosimilar versions of Humira in the U.S. and Europe will take their toll on the company's stock. Warning shots over the bow don't do any actual damage, though. AbbVie should keep on sailing ahead for several years to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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