Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

It's a David-and-Goliath day in pharma. 

AbbVie is a nearly $100 billion dollar company. Its lead inflammation drug, Humira, did $14 billion in sales last year. Coherus Biosciences' $740 million market cap represents only about 20 percent of Humira's sales in just one quarter. That isn't stopping the smaller firm from being a serious threat to the blockbuster. 

Coherus is working on a biosimilar copy of Humira, and it's trying to knock out AbbVie patents in order to get its drug on the market faster. It now has a better shot at that goal: The U.S. Patent Trial and Appeal Board (PTAB) announced Tuesday it will begin an approximately year-long review that could invalidate a key Humira patent Coherus is challenging. AbbVie could appeal an unfavorable decision, and it has other patents. But this is a blow.

The decision suggests the company's patent armor, the basis for its sky-high hopes for Humira, can be penetrated. Coherus shares were up 15 percent Tuesday afternoon, while AbbVie's were down about 5 percent.

Patent Tango
The government may invalidate an AbbVie patent on Humira. Coherus, which is challenging the patent, is working on a biosimilar copy of the drug.
Source: Bloomberg

Coherus is using a process called Inter Partes Review (IPR) to challenge AbbVie's patents. It's been embraced by companies trying to get drug copies on the market faster. AbbVie investors have been closely watching a series of IPR petitions against patents for Humira, which accounts for more than 60 percent of AbbVie's sales. How these challenges play out will help determine whether competitors start eating at the company's revenue in three years or six.

Until Tuesday, things had been going AbbVie's way. The PTAB denied two Amgen IPR petitions on Humira patents in January, frustrating that company's hopes to get a copy on the market by 2017.

AbbVie in October said Humira would be safe for years to come, projecting sales of more than $18 billion in 2020. Competition may arrive in Europe as soon as 2018, AbbVie has said, but shouldn't be a factor in the U.S. until much later. The company has 70 plus U.S. patents on the drug that don't start expiring until 2022. It also suggested legal action around any biosimilar competitor could take up to five years to resolve.

That guidance boosted analyst expectations for Humira sales, as did the Amgen decision a few months later. Before Tuesday's decision, Wall Street consensus had the drug's sales peaking in 2018 at $17.8 billion.

The Great Moderation
When exactly Humira revenue will start to decline is of huge import to AbbVie's future, and is extremely hard to forecast.
Source: Bloomberg
*AbbVie's Humira guidance is for "more than" $18 billion in sales in 2020

Competitors now have a clear way in. The patent that could be invalidated by Coherus is a "cornerstone" of the Humira patent estate, according to Barclays analyst Geoffrey Meacham. Adding to the risks to AbbVie, the PTAB will decide whether to review Coherus challenges on two other Humira patents by June 15. 

If the first patent falls, then so might others, which could lead to faster U.S. competition for Humira. That would put a lot more pressure on the company's pipeline of other drugs and big investments in cancer medicines. AbbVie has spent heavily for some promising treatments, but making up for Humira's eventual decline is a lot to ask.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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