Why Abbvie Inc. Slumped 13% In September

What:• The large cap biopharma company is investing heavily in R&D to

offset risk tied to the looming patent expiration of Humira.– Humira generates more than $12 billion in annual sales.– Humira accounts for 63% of year-to-date revenue.

• Expansion into hepatitis C offers billion dollar potential.– Competitor Gilead Sciences reports positive phase 3 data for its

pan-genotype hepatitis C drug on September 21.• Shares dropped 12.8% in September.

Source Juno Therapeutics

AbbVie Inc.

So what:• Humira is AbbVie’s top selling therapy.– Sales of $6.6 billion through the first six months of 2015.– Patent protection ends on Humira in 2016.

• AbbVie launched Viekira Pak for hepatitis C in Q1 2015– Viekira Pak Q2 sales tracking at an annualized $1.5 billion

pace.

So what continued:

So what continued:• Gilead Sciences announces positive data for next-generation, pan-genotype

hepatitis C therapy.– 99% overall cure rate, including 98% rate in genotype 1.

• Could reduce demand for Viekira Pak in genotype 1 patients.– Robust efficacy across genotypes 1 to 6.

• Could remove need for genotype testing.• Could outmaneuver AbbVie’s pan-genotype next generation therapy:

ABT-493 + ABT-530.

Now what:• Humira patent risk looms, but efforts underway on next-generation

autoimmune drugs.• ABT-494: Advancing into late stage trials by year end.

– 82% of rheumatoid arthritis patients achieved a 20% or greater improvement in symptoms in phase 2 trials.

– In anti-TNF (such as Humira) non-responders, 71% achieved a 20% or greater improvement.

– Safety profile potentially better than Humira with most common adverse event being headache.

– Oral dosing rather than injection dosing like Humira.

Now what continued:• Significant opportunity in oncology.– Acquired Pharmacyclics in May to get Imbruvica.• Fast growing drug with billion dollar annual sales potential.

– Venetoclax potential regulatory filing by year end.• Relapsed/refractory CLL with 17p deletion genetic mutation.

– Elotuzumab filed for approval. • Decision expected in February 2016.• Improved progression free survival when added to standard

of care.

Now what continued:• Absent a Humira successor, significant risk remains.• Continue to monitor progress on oncology pipeline.• Look for insight into timeline for next-generation pan-

genotype HCV therapies during Q3 EPS report.• Recent decline may offer opportunity if company can

execute on its plan to overcome Humira risk.– Underweight in portfolios until clarity exists.

Leaked: The next billion-dollar iSecret