AbbVie Rises as Analysts Remain Bullish Despite Drug Warning

  • FDA warning on hepatitis C drug applies to small patient group
  • Shares gain 6 percent after plummeting late Thursday

AbbVie Inc. shares rose on Friday as analysts said investors had overreacted in selling shares following a warning by U.S. regulators on the company’s hepatitis C drug.

The drugmaker rose 6 percent to $51.19 at 12:48 p.m. in New York. On Thursday, the U.S. Food and Drug Administration said that 10 patients taking AbbVie’s drugs Viekira Pak and Technivie died or had liver failure, after which the stock fell 10 percent. The FDA issued a statement saying it would change its advice on how the medicines should be administered, adding a warning for certain groups of patients who have serious liver damage already.

“On paper the stock movement in this instance does not make sense to us,” Mark Schoenebaum, an analyst at Evercore ISI, wrote after Thursday’s drop. In a follow-up note Friday, he said that the patients referenced in the FDA warning make up 3 percent to 5 percent of the potential U.S. market for the drug.

Other analysts also downplayed the significance of the FDA warning.

Jeffrey Holford, an analyst with Jefferies, said that “AbbVie shares were already trading far too cheaply before yesterday’s over-reaction in our view.”

“We wouldn’t expect AbbVie to lose all the share,” Michael Yee, an analyst at RBC Capital Markets, wrote in a note. “This may not be a complete surprise as AbbVie’s drug is contra-indicated in many patients with drug-drug interactions.”

Market Competition

AbbVie and Gilead Sciences Inc. are competing head-to-head in the market for new hepatitis C medicines that offer shorter and more effective treatments than older therapies. Gilead was first to market with a cure, and its drug Harvoni is a once-a-day pill, in contrast to AbbVie’s treatment, which requires multiple pills. Both companies have faced criticism for their drugs’ list prices, which amount to as much as $1,000 a day, though insurers have negotiated much lower rates by pitting the companies against each other.

Doctors split on how seriously to take the warning for patients who haven’t seen the beginnings of liver failure.

“I would only prescribe this medication in one circumstance -- if I have a young healthy individual with no other co-morbidities, with no extensive list of other medications that they’re taking,” Dmitri Alden, a liver surgeon at Lenox Hill Hospital in New York, said by phone, referring to AbbVie’s drug. He said that those patients constituted the minority of his practice. “Harvoni is the Cadillac and Mercedes-Benz of hepatitis C treatment today,” he said.

To Raymond Chung, a liver doctor at Massachusetts General Hospital in Boston, the FDA warning only matters for people who have begun to see liver failure -- by far the minority of his patients.

“The bottom line is that for the vast majority of patients who don’t have decompensated cirrhosis, these combinations perform excellently,” Chung said by phone, referring to people whose scarring has not hurt the liver’s ability to work. Comparing Viekira Pak to Harvoni, he said, is “potentially grading an A regimen against an A-plus regimen.”

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