FDA warning on AbbVie hep C drugs gut kicks its share price

Viekira--Courtesy of AbbVie

AbbVie's Viekira Pak and Technivie were developed to cure hepatitis C and so to avoid the complications like liver transplants that can result from the disease. But the FDA said today that in some cases the two drugs may cause serious liver injury, even death, mostly in patients with underlying advanced liver disease, and told AbbVie it would have to add a warning to its labels.

While AbbVie ($ABBV) was quick to point out that some of the problems were in patients for which the drugs were not indicated, Bernstein analyst Tim Anderson said this is likely bad news for AbbVie in the ultracompetitive, high-stakes hep C market. And in fact, the markets sliced more than 10% off of AbbVie's share price by the market close, a reaction that Evercore ISI analyst Mark Schoenebaum said was hard to fathom, even in a market looking for reasons to sell. It shares had recovered some Friday up more than 6%. Shares of Gilead Sciences ($GILD), which has the market-leading Sovaldi and Harvoni, closed up 5.77%

In its warning, the FDA said 26 cases of liver issues have been reported since the drugs were approved that were related or probably related. Viekira Pak was approved in December 2014 and the combo drug Technivie in July 2015. Some of those reports were in patients for which the drug was not recommended. It said the problems were generally seen in the first 1 to 4 weeks.

"Some of these events resulted in liver transplantation or death," the FDA said in a MedWatch notice. "These serious outcomes were reported mostly in patients taking Viekira Pak who had evidence of advanced cirrhosis even before starting treatment with it."

In its statement, AbbVie said that a "causal relationship between treatment and these events has not been established." It said that inserts for the two drugs "have been updated from 'not recommended in Child Pugh B patients' to a contraindication in patients with Child-Pugh B cirrhosis." For Viekira Pak, it also includes a recommendation that doctors assess evidence of "hepatic decompensation prior to treatment and during treatment in cirrhotic patients."

Anderson said in a note to investors that this is probably a "damaging event" for AbbVie given that Gilead Sciences' hep C drugs Sovaldi and Harvoni already have an edge over AbbVie's meds. Gilead's pills are taken once a day compared to the multipill regimen of AbbVie's drugs, and they have a better safety record, even before Thursday's announcement. That is why Gilead holds about 85% of the market share and AbbVie only 15%, despite discounting by AbbVie.

Right now, Anderson points out, analyst consensus is that Gilead's drugs will have $17 billion in sales next year and AbbVie's $2.5 billion. This event may help Gilead pick up some additional market share. But one beneficiary may be Merck ($MRK), he said, which has sent its hep C treatment to the FDA for approval. Merck's treatment is projected to get between $600 million and $700 million in sales next year, he said, but it might gain from AbbVie's misfortune, getting an unexpected boost for the third product to the market.

This was not the first indication of safety concerns with AbbVie's drugs. The FDA warning comes shortly after healthcare informatics firm Advera Health Analytics issued a new side effect report on hep C treatments and found that AbbVie's Viekira Pak was the riskiest option among it and Gilead's meds.

- here's the FDA warning

Special Reports: The new drug approvals of 2014 - Harvoni - Viekira Pak | The new drug approvals of 2013 - Sovaldi - Gilead