AbbVie guides cautious on Viekira with sharp competition and price cuts ahead in Japan

AbbVie CEO Rick Gonzalez

AbbVie ($ABBV) CEO and Chairman Rick Gonzalez gave a good update on Japan for hepatitis C treatment Viekira which entered a market in December already served by Harvoni (ledipasvir/sofosbuvir) from Gilead Sciences ($GILD) and Bristol-Myers Squibb ($BMY) product Daklinza (daclatasvir/sofosbuvir).

The news, on the Jan. 29 earnings call, pointed to plans for sharp gains in the competitive reimbursed market, but those gains were tempered by overall price cuts across products in the works that have already been communicated to the company, and came in a bit lower than expected.

In "Japan to your point, we launched very late in the fourth quarter," Gonzalez said in response to an analyst question on the call. "And so far, and I had an update just a week or so ago from the team, Japan is going well. It's tracking on our expectations."

The company got a reimbursement nod in late November and in December began offering the once daily 12-week regimen at ¥4.5 million ($36,600) for the combination product to treat genotype 1 hepatitis C, which accounts for around two thirds of patients.

In Japan, Viekira per pill costs ¥26,801, less than half the ¥80,171 cost for Harvoni.

But reimbursement in Japan sees a sort of double-whammy this year with price cuts for widely prescribed drugs by Japan's Central Social Insurance Medical Council, known as Chuikyo. Reports suggest some drug prices could be cut in half.

On top of that, an every-other-year price cut exercise in April may aim for savings of nearly $1.5 billion.

"So the Japanese market price adjustments, we are aware of it," Gonzalez said in response to an analyst question on product price cuts, not just Viekira.

"It has been communicated to us. So it's built into our 2016 guidance. I don't think it's something we can tell you because really the Japanese authorities need to release that, not us. But I'd say it was in the range slightly lower than we would have expected."

That had analysts questioning figures going into 2016 after Bill Chase, executive vice president and chief financial officer, talked up international sales.

"Global Viekira sales in the fourth quarter were $554 million. The international launch has exceeded our planning expectations, resulting in a higher mix of international sales again this quarter."

However Gonzalez cautioned that with Merck ($MRK) now in the game with Zepatier for hep C genotypes 1 and 4, the overall guidance for next year was conservative.

"If you look at what we're guiding going forward it is less than our fourth-quarter annualized and that is our intent," Gonzalez said in response to an analyst question on the outlook for sales.

"There's two factors there. Let's be honest, we've had trouble predicting this number, so we wanted to go into 2016 with a number that we had a very high level of confidence that we could hit. So that is certainly a component of it. The second component is we are assuming some level of competition from Merck."

"So we'll have to see how it plays out but I would say we're going to set this one at a number that we have a high level of confidence that we think we can deliver. And I'd much rather surprise you on the positive than sit here and apologize on the miss."

- here's the release from AbbVie