Humira biosimilars will gut AbbVie's sales in 3 years, analyst says

Pharma analysts have different opinions on how much branded drugmakers will feel the heat from biosimilars--and when they'll feel it. But according to one Citi analyst, they're all underestimating the impact on AbbVie's ($ABBV) top dog.

The bank initiated coverage on the Illinois drugmaker Monday, slapping on a Sell rating and a $48 price target. And that's because the way analyst Andrew Baum sees it, when it comes to the "timing and magnitude" of biosimilars on the company's best seller, Humira, the market is getting it wrong.

"The critical investment debate for AbbVie … rests on a single issue--the outlook for the estimated $16 billion Humira base business post the U.S. patent expiration in 2016," he wrote in a report seen by Benzinga. And Baum expects that business to take a hit beginning in 2018, with Humira revenues declining from $16 billion at their peak in 2017 to $6 billion in 2022, thanks to biosimilar rivals.

While analysts agree the Abbott ($ABT) spinoff will need more than its recent hep C approval Viekira Pak to fill Humira's giant shoes, some of Baum's peers think forthcoming data on the company's cancer candidates is enough to keep the stock climbing upward. Monday, Jefferies analyst Jeffrey Holford stood by his Buy rating and $80 target for that reason, Benzinga notes.

Industry watchers, too, have predicted that biosimilars may take a while to gain traction even after their approval--and so far, none of them have received the FDA's green light. Novartis ($NVS) CEO Joe Jimenez, for one, has predicted that the tipping point wouldn't come around till 2020.

When it comes to Humira, though, Baum disagrees. "At year 3, biosimilars will achieve 36% U.S. market share in Humira patients and 25% in established Humira patients," he wrote. He also expects "European price discounts to be steeper due to reference pricing on brand and progressive discounting on biosimilars."

AbbVie CEO Richard Gonzalez

Of course, there are still moves AbbVie can make to bolster its position and decrease some of the reliance on its aging behemoth. One of them is to lock down some value-enhancing M&A, which it almost did this summer with an agreement to buy Ireland's Shire ($SHPG) before new U.S. tax rules forced it to backtrack. CEO Richard Gonzalez has told investors not to expect a follow-up $55 billion deal, but that smaller ones could be in the company's future. And if they're not? AbbVie's valuation "looks challenging," Baum wrote.

- get more from Benzinga here and here

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