Please ensure Javascript is enabled for purposes of website accessibility

Did AbbVie Just Make an Incredibly Brilliant Decision?

By Todd Campbell – Aug 21, 2015 at 8:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

AbbVie just paid $350 million for a voucher that can shorten the wait for FDA approval of one of its drugs.

Source: AbbVie.

In multibillion-dollar markets, time is of the essence. And if you have $350 million in spare change lying around and happen to be a biopharma company like AbbVie (ABBV -5.96%) that is reliant upon a regulator's timeline for approving your next top-selling product, apparently you can speed up time.

Sneaking in the back door
Because it takes the FDA 10 months after accepting a new drug application to issue a go/no-go decision, big money gets left on the table that otherwise could be in a drugmaker's pocket; especially when the drug under consideration is for use in a big market like hepatitis C, where every month that passes means a billion dollars or more of lost market opportunity.

With so much money at stake, it's probably not surprising to learn that biopharma companies have found a way to speed up the FDA's timeline.

By buying a priority-review voucher awarded by the FDA to a peer that isn't going to use it, a company can reduce the FDA review period for its own drug from the typical 10 months to a more palatable six months.

Shelling out cold hard cash
In the case of AbbVie, it turns out those four extra months are worth $350 million in cash. That's how much AbbVie recently paid to get its hands on a priority-review voucher the FDA awarded United Therapeutics in March for Unituxin, a therapy for a rare pediatric disease.

The price AbbVie paid for the voucher continues a string of ever-increasing sums that are changing hands for these vouchers. Although AbbVie hasn't disclosed which drug in its pipeline it will apply the voucher to, the amount of money involved suggests its likely to be used for a big-market drug, such as the company's next-generation hepatitis C drug therapy, one of its promising cancer drugs, or one of AbbVie's successor drugs to Humira, its top-selling autoimmune disease drug that is expected to lose patent protection at the end of 2016.

Source: Author's calculation.

Picking up the pace in HCV
Personally, it wouldn't surprise me if the company used the voucher to accelerate approval of its pan-genotype, once-daily, next-generation drug for hepatitis C.

The company is studying the efficacy and safety of combining the protease inhibitor ABT-493 with the NS5A inhibitor ABT-530 in phase 3 studies and in phase 2 studies, and the duo achieved a functional cure in 99% of genotype 1 patients without the co-administration of ribavirin.

AbbVie believes that the ABT-493/ABT-530 co-therapy could be used across various genotypes of HCV and that it could prove to be effective over a dosing period of as little as eight weeks. If so, then it could pose a much larger threat to market-share leader Gilead Sciences' (GILD -2.19%) Sovaldi and Harvoni than its current HCV drug, Viekira Pak, which is approved for genotype 1 HCV, requires multiple doses daily for 12 weeks, and is often dosed with ribavirin.

Additional results from AbbVie's ABT-493/ABT-530 midstage studies should trickle out later this year and phase 3 results should come in 2016, but given that Gilead Sciences is already working on its own pan-genotype, next-generation approach and that Gilead Sciences expects to announce phase 3 data from its studies shortly, pressure to get ABT-493/ABT-530 to market quickly will be high.

Looking ahead
Because millions of patients remain untreated and therapies are expensive, the market for hepatitis C treatment has become incredibly lucrative. In the second quarter, Gilead Sciences reports total HCV drug sales that are running at an annualized clip of nearly $20 billion and AbbVie's Viekira Pak posted $385 million in sales, leading to AbbVie reiterating its expectations to exit 2015 with annualized Viekira Pak sales of $3 billion. Given the amount of money at stake, a $350 million investment for a voucher that can reduce approval time by four months could end up proving to be a very good investment.

Todd Campbell owns shares of Gilead Sciences. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. he Motley Fool recommends Gilead Sciences. The Motley Fool owns shares of Gilead Sciences. 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$61.69 (-2.19%) $-1.38
United Therapeutics Corporation Stock Quote
United Therapeutics Corporation
$209.38 (0.69%) $1.44
AbbVie Inc. Stock Quote
AbbVie Inc.
$134.21 (-5.96%) $-8.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.