In the next few several blockbuster drugs will lose patent exclusivity, which will result in the loss of over $100 billion in revenues across the pharmaceutical industry. After a drug’s patent expires, generic manufacturers can replicate and sell the product at much cheaper prices, generally leading to a steep decline in the drug’s revenues. We have recently begun taking a look at the prospects of major divisions of pharma companies under our coverage following the patent cliff (Read Pfizer Patent Cliff: A Look At The Cardiovascular Drugs Division and Merck Patent Cliff: A Look At The Anti-Infectives Drugs Division). In this article, we will discuss the prospects of Abbott’s Autoimmune and HIV drug divisions, though the company is still better off than many of its competitors due to no significant near-term patent expiries.
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The autoimmune market includes treatments for rheumatoid arthritis, Crohn’s disease, Addison’s disease, multiple sclerosis, and Type I diabetes. Abbott owns the world’s best-selling drug in the autoimmune market, Humira, which is mainly used to treat rheumatoid arthritis. It competes primarily with Pfizer and Johnson & Johnson in this market. While the division is safe in the near term, it will likely go through significant pain once the Humira patent expires in December 2016, as the drug clocked over $8 billion in revenues in 2011. We expect revenues from the drug to top $10 billion by 2013, followed by a gradual 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.
We expect a steep decline in Humira’s sales after the U.S. patent expiry in December 2016 (including a year’s extension). This patent expiry will significantly affect revenues by the beginning of 2017 as generic manufacturers will be able to sell similar products at lower prices. However, generic erosion for biologics could be much slower and more limited than small molecules. Further, one will have to closely watch if its deal with Galapagos to develop and commercialize an oral JAK1 inhibitor reaps benefits for the company.
Abbott’s HIV antiviral Kaletra was approved in 2000 and is set to lose its patent protection in June 2016. Bristol-Myers’ drug atazanavir and Johnson & Johnson’s darunavir are major competitors in the market. While the drug has already seen a significant decline in sales due to competition and its exclusion from the list of preferred treatment options in some of the U.S. Department of Health and Human Services’ (DHHS) guidelines, the patent expiry will certainly hit the sub-division as the drug still generates close to $1 billion in sales. However there is a major pipeline drug to potentially offset the revenue loss.
Our price estimate for Abbott Labs stands at $67, implying a premium of about 5% to the current market price. In our next article, we will look at other divisions of the company.