The U.S. Food and Drug Administration (FDA) has finally approved the extension of Abbott Labs‘ (NYSE:ABT) largest selling drug Humira for the treatment of moderate to severe Ulcerative Colitis (UC). Ulcerative colitis is a chronic inflammatory bowel disease that causes inflammation and ulcers in the inner lining of the large intestine and affects about 700,000 people in the U.S. However, the treatment will be limited only to patients who have failed to respond to other first line of drugs. ((Abbott’s HUMIRA® (adalimumab) Receives U.S. FDA Approval for the Treatment of Adult Patients with Moderate to Severe Ulcerative Colitis, Abbott Press Release, Sept 28 2012))
We were anticipating the approval in the offing after a FDA advisory panel had backed the drug even as the FDA staff had earlier raised some concerns about the benefits. (Read FDA Panel Backs Humira for Colitis, Gets Additional Treatment Approval In Europe) The event lends support to our expectations of continued growth in sales of Humira in near future.
We have a $67 price estimate for Abbott Labs, and we believe that the company’s current valuation already reflects all positive factors after appreciating nearly 30% in the last year.
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Humira has been a phenomenal drug for Abbott. It is the world’s best-selling drug in the autoimmune market, with an estimated market share of over 30% in the near $25 billion autoimmune market. Other indications for which Humira is approved in the U.S. include Psoriatic Arthritis, Ankylosing Spondylitis, Crohn’s Disease, Juvenile Idiopathic Arthritis, and Plaque Psoriasis. Ulcerative Colitis will be Humira’s 7th indication in the U.S. and will open much awaited revenue stream for the drug.
Recently, the drug got European approval for the treatment of moderately active Crohn’s disease (a form of inflammatory bowel disease that affects intestine). The continuance of such approvals would lend support to Abbott’s efforts to expand the drug’s base to new indications to overcome increasing competition and new entrants in the key Rheumatoid Arthritis market where Humira remains a distinguished leader. (Read Roche Threatens Abbott’s Humira with Favorable Results for Rheumatoid Arthritis).
Humira’s revenues exceeded $8 billion in 2011, and we expect it to top $10 billion by 2013. Thereafter, we expect the revenues to gradually decline as competition penetrates the market. Pfizer is getting ready with its oral drug tofacitinib while Roche recently reported better efficacy results for monotherapy RA patients. Recently, Belgium-based company Ablynx also claimed to show benefits over Humira.