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Maher Syed

As Humira Alternative Gets FDA Approval, Is Abbvie in Trouble?

AMGN ABBV

Trades from $3

On Friday, the FDA gave market approval to a Humira (adalimumab) alternative called Amjevita (adalimumab-atto).  Amjevita is one of nine programs in Amgen’s (AMGN - Free Report) pipeline of biosimilar drugs.  Biosimilars are a relatively new frontier in the biotech space, and Amjevita is just the fourth one to receive FDA approval.

Biosimilars are not the same as interchangeable products such as generic drugs.  Rather, a biosimilar is a biological product that gets approved if it is shown to be highly similar to an already-approved product.  This means that there should not be meaningful differences in clinical studies that measure the drug’s safety, purity, and potency.

Humira vs. Amjevita

In the years following Humira’s approval in 2002, the FDA has expanded the number of conditions that it can be used to treat.  Now that Amjevita has been given the green light by the FDA, it can be used for most of the conditions which Humira treats.  Amjevita is approved to treat multiple conditions afflicting adults, such as moderate to severely active rheumatoid arthritis, active psoriatic arthritis, active ankylosing spondylitis, moderate to severely active Crohn’s disease, moderate to severely active ulcerative colitis, and moderate to severe plaque psoriasis.  Amjevita is also approved to treat moderately to severely active polyarticular juvenile idiopathic arthritis in patients who are four years of age and older.

Is Abbvie (ABBV - Free Report) in Trouble?

Biosimilars are supposed to cost less than the original product which they are based off of, but there is no clear indication of how much Amjevita will cost when it is launched.  On the other hand, Humira often costs about $2000 per month.  Amjevita is expected to be a cheaper option than Humira, so Abbvie could see some of its dominant share in the arthritis market contract when Amgen’s new drug is launched.

This could be a major concern for Abbvie, who saw Humira revenues account for over $14 billion of its total sales ($22.8 billion) in 2015.  Humira is ABBV’s top product, and revenues generated from the drug are close to ten times higher than any of the company’s other products.  In the first six months of fiscal 2016, Humira generated 62.3% of Abbvie’s total sales.  Since Friday’s announcement of Amjevita’s approval, Abbvie’s stock has dropped by about 1.3%.

Bottom Line

Since a direct competitor is set to take on Humira in the future, Abbvie’s long term cash flows will become more difficult to forecast.  If you are invested in ABBV for the long run, you may want to reassess your position as more news comes out about when and how much Amjevita will cost.

Amgen looks poised to take advantage of the biosimilars market that has emerged in recent history.  As mentioned earlier, the company has nine biosimilar programs in its pipeline.  If you are looking to cap in on this technology which is meant to reduce drug costs for patients, then Amgen looks like a solid stock to bet on over the long run.

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