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Plus, minuses in Abbott split, analysts say

Updated: January 30, 2013 6:13AM

CHICAGO — Analysts see promise and problems for the new companies that will emerge from Abbott Laboratories.

AbbVie is armed with the best in class immunology drug Humira, a blockbuster medicine, which is used to treat rheumatoid arthritis, psoriasis, Crohn’s disease and other illnesses. The drug accounts for more than 50 percent of AbbVie’s total sales, and more than 70 percent of its profit, and therein lies the rub.

The biggest challenge is the high reliance on Humira,” said Morningstar Inc. Director of Pharmaceutical Research Damien Conover. “There is new competition coming.”

New branded drugs are launching in all of Humira’s key therapeutic areas, he noted, including Pfizer’s new rheumatoid arthritis drug, tofacitinib. That drug’s efficacy is potentially as good as Humira and is in an oral form as compared to the twice-monthly Humira injections, although tofacitinib’s side effect profile is not fully clear and represents some risks, he said.

Meanwhile, Humira will lose patent protection in the U.S. in late 2016 and in Europe in 2018, leaving it open to potential generic competition.

Worst case scenario, Humira sales could plummet 50 percent in 2018, according to Conover.

AbbVie also will face the loss of patent protection on some of its cholesterol drugs, including Tricor, Trilipix and Niaspan, which will face generic competition starting next year.

“So the reliance on Humira will continue to grow over the next one to two years,” Conover said.

But on the positive side, he notes Humira is approved in therapeutic areas where the average treatment penetration is well below 20 percent, which should provide further room for the drug’s sales to grow, and its complex biologic structure could impede generic competition.

Conover expects Humira to have an 11 percent five-year compound annual growth rate due to a high conviction in its strong efficacy and safety.

Best case scenario, assuming generic and branded competition fail to significantly take market share from Humira, he projects 2 percent Humira annual sales growth in 2018.

He adds Humira positions AbbVie to support the company’s next generation of pipeline drugs.

“They are developing their pipeline; it’s something that is improving,” he said. “I would anticipate next year we’d see some acquisitions of companies that could further augment their internal efforts of research and development, so that would enable them to bring new products to the market to help them diversify a little bit away from Humira.”

Key products in late-stage development in Abbott’s pipeline include drugs to treat Hepatitis C. The drugs are now referred to as ABT 450, ABT 333 and ABT 267.

“Those three collectively could all bring in close to $5 billion in annual sales if they are successful and other competitive products are less successful,” Conover said.

As for the new Abbott, Morningstar senior analyst Debbie Wang sees opportunities for it to raise its profitability. The company’s nutritionals business faces brighter growth prospects outside the U.S. and especially in emerging markets, where the growth of middle-class families has spurred demand for pediatric and adult nutrition products, such as Similac and Ensure, Wang said in a research report. The company has made extensive investments in building out its emerging markets infrastructure, positioning it to reap rewards there, she contends.

The new Abbott’s branded generics business also should benefit from Abbott’s nutritionals infrastructure, she wrote.

Regarding the company’s device segment, the jury is still out on Abbott’s ability to innovate in this segment, she noted.

Abbott has touted its ABSORB resorbable stent heart product, which landed regulatory approval in Europe, as an example of innovation.

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