AbbVie's Boom or Bust Bet
When AbbVie shelled out $21 billion for Pharmacyclics and its blood cancer drug Imbruvica in March, the reaction could be charitably described as mixed. Less charitably, people kind of hated it.
There were serious doubts over the valuation and whether the company would ever be able to recoup its investment, as it must split revenue on the treatment with Johnson & Johnson. AbbVie is seen as overdependent on its blockbuster drug, Humira, which may face generic competition as soon as 2017. Buying Imbruvica was a risky stab at fixing that -- but it looks like it may pay off.
Imbruvica is FDA-approved to treat three diseases right now, most notably as a second-line drug for two types of blood cancer if an initial round of different drugs fails. AbbVie and Johnson & Johnson are shooting for many more approvals.
At the time of the acquisition, AbbVie predicted it would see $7 billion a year in revenue at the drug's peak, which means over $12 billion in total annual sales given the revenue split with J&J. That wouldn't entirely make up for the loss of Humira, with about $14 billion in projected sales this year, or more than 60 percent of AbbVie's total. Still, it's is a pretty good cushion.
But getting to that $12 billion number depends largely on the drug being approved as a solo and first line of therapy for those blood cancers, which would dramatically increase sales potential. Imbruvica works differently than chemotherapy and has fewer negative side effects. It's also taken orally rather than injected or infused, another bonus. Doctors might be eager to prescribe it if the FDA decides next year to approve it for first-line use.
Studies presented in detail at the American Society for Hematology (ASH) annual meeting this week had good news on that front, confirming Imbruvica's effectiveness and bolstering its case for approval as a first-line therapy. In a 269-person, Phase III study (meaning the last stage of studies before a drug is marketed), Imbruvica substantially increased the survival of chronic lymphocytic leukemia (CLL) patients over 65 and reduced the cancer's presence compared to chemotherapy. Another 280 person, Phase III study showed the drug beating out the current standard of care in mantle cell lymphoma. More-tentative Phase I and II studies showed promising early results as part of a combination therapies for multiple myeloma and follicular lymphoma.
The big upside bet by AbbVie and J&J is aggressively pushing the drug into new treatment areas. The company is running trials in several other types of leukemia and lymphoma, as well as graft versus host disease (a negative immune reaction to a transplant), and pancreatic cancer. There's also some early evidence that the drug may penetrate the blood brain barrier (a filter between the brain and circulating blood), which may allow treatment of a wider variety of cancers. A possibly longer shot is the attempt to use the drug on solid tumors, which has big sales potential, but is uncertain and very early stage. There's also potential to combine the drug with other therapies, including some AbbVie is developing on its own.
On a call at the time of the acquisition, AbbVie CEO Rick Gonzalez predicted that about a quarter of the growth needed to get Imbruvica to $12 billion in sales would come from expanded use under the drug's current approvals. First-line therapy approval would drive a third of that growth. The rest would come from expanding to other treatments.
It was easy to be skeptical of Gonzalez's vision then, when his big talk was overshadowed by Imbruvica's very big price tag. The ASH data have brought that vision closer to reality. Meanwhile, sales of Imbruvica for its currently approved uses have beaten analyst expectations in each of the two quarters AbbVie has reported its sales.
There are some threats to the drug's success. Some patients may become resistant. Patients who relapse after having taken Imbruvica may be more difficult to treat in the future, possibly discouraging some doctors from using it as an early treatment. But the drug is so effective that doctors may be OK with the tradeoff, suggests Bloomberg Intelligence analyst Sam Fazeli. It helps that AbbVie's early-stage cancer drug, venetoclax, could be an alternative or addition to Imbruvica in tough-to-treat patients.
Many more studies and FDA approvals lie between the $1 billion in Imbruvica sales expected this year and AbbVie's lofty hopes. But $12 billion is looking more attainable, and that price tag a bit less eye-popping.
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