Competition for Abbott Labs‘s (NYSE:ABT) blockbuster drug Humira is growing increasingly as drug makers strive hard to grab a bigger share in rheumatoid arthritis (RA) market, which is currently dominated by Humira. After Roche’s recent claims of better efficacy results for monotherapy RA patients, Belgian drug developer Ablynx has reported that its arthritis drug ozoralizuma has demonstrated benefits over Abbott’s Humira. Data from a clinical study showed that less than 1% of patients had developed immunity to the treatment whereas, according to Abbott, close to 5% of Humira patients develop antibodies. 
Our price estimate for Abbott Labs stands at $66, implying a premium of about 5% to the current market price.
We believe these results don’t present an imminent threat to Abbott’s bastion in the autoimmune market as it may be difficult to change a physician’s prescription habits for biologics. However, if our belief is proved wrong, it could result in a considerable loss of market share for Humira. Consequently, it will lead to a significant downside to the company’s value as Humira accounts for nearly 20% of Abbott’s stock, according to our estimates.
What would be interesting is that if Abbott looks at Ablynx as an opportunity rather than a threat. The latter is trying to find a partner after Pfizer backed out last year. But, this looks a distant possibility as Abbott recently entered into a deal with Galapagos to develop and commercialize an oral JAK1 inhibitor in Phase II development to take on Pfizer (NYSE:PFE), which is getting ready with its oral drug tofacitinib.
By tweaking the chart below, you will see how a change in Abbott’s market share in autoimmune drug market impacts our price estimate for the stock.Notes: