Do Bristol-Myers, Others Have Eyes On Abbott Spin-Off AbbVie?

Jan.25.13 | About: AbbVie Inc. (ABBV)

By Barry S. Cohen, Stock Traders Daily

It's less than a month old, but there's a question whether Abbott Laboratories (NYSE:ABT) spin-off AbbVie (NYSE:ABBV) will survive as an independent company long enough to see its first birthday.

Rumors persist that potential suitors for AbbVie include Bristol Myers-Squibb (NYSE:BMY) and Roche (OTCQX:RHHBY). Bristol needs a boost to its pipeline and may be looking longingly at what AbbVie has in the works: 10 drugs in pivotal-stage testing and more than 10 in mid-stage trials. Roche seems to be a less likely acquirer since its focus seems to be more on gene sequencing than a big pharmaceutical merger. Whether you think AbbVie is going to be acquired or remain independent, you can learn more about potential acquirers by reading our real-time trading reports for these companies.

Among the drugs being tested by AbbVie is a potentially promising next-generation hepatitis C drug, the intestinal gel Duopa for the treatment of advanced Parkinson's disease, daclizumab for multiple sclerosis, and new indications for Humira -- which already has nine indications and has another four in late-stage development, such as pediatric Crohn's disease. If it survives an independent company, AbbVie will certainly need many of those drugs being tested to be winners. That's because the company today is pretty much a one-trick pony, with its anti-inflammatory Humira accounting for about half of AbbVie's $18 billion in annual sales and about 70% of the company's profits.

The big challenge will be in 2016, when Humira's patent expires. The drug is also facing some formidable competition, including Pfizer's (NYSE:PFE) Xeljanz for rheumatoid arthritis. which got FDA approval in November 2012. More competition is on the horizon as well. When baricitinib -- from Eli Lilly (NYSE:LLY) and Incyte (NASDAQ:INCY) -- enter the market. AbbVie has lost or will lose patent protection for a couple of key cholesterol drugs last year -- TriCor and Trilipix -- and another, Niaspan, this year and last, putting another $835 million in sales at risk.

Some have speculated that AbbVie may me an acquirer rather than a target to pick up the slack. But the company says it has no plans to use its $7 billion in cash to make a large acquisition, confident that its pipeline will meet future revenue growth.

The company may be interested in some smaller acquisitions and licensing arrangements, though. With a large established sales force and an established research base, AbbVie should be an attractive partner for smaller companies seeking to develop and commercialize their products.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: By Barry Cohen for Stock Traders Daily, and neither Mr. Cohen or Stock Traders Daily receives compensation from the publically traded companies mentioned herein for writing this article.