AbbVie Is Under Duress With Fierce Competition

| About: AbbVie Inc. (ABBV)

Summary

AbbVie has been dropping over the past month as investors are getting concerned with all the competition surrounding its products.

The appeal for competitors to create an alternative to HUMIRA is because HUMIRA is a pipeline within a product.

AbbVie is my smallest position and has not been doing well, as I'm down 0.3% on the name including reinvested dividends.

AbbVie (NYSE:ABBV) has been dropping over the past month as investors are getting concerned with all the competition surrounding its products, specifically the Amgen (NASDAQ:AMGN) biosimilar to compete against HUMIRA. The stock has dropped to the tune of 5%, but at least there was an ex-dividend date in between there on October 12 th.

Amgen however wasn't the only company focusing their efforts on the HUMIRA pie. Shire was also in the running but recently halted its partnership with Momenta in search of a biosimilar. But just because Shire halted the partnership does not mean Momenta will halt its efforts or stop anyone else from coming to replace Shire for developing and commercializing the product. In fact, because of the deal Baxalta (Baxalta was acquired by Shire) signed with Momenta, Shire has to continue funding Momenta for a year on the project. This is by no means an invitation to AbbVie to rest on its laurels, as the competition for HUMIRA is heating up with Samsung being thrown in the mix for European approval of their biosimilar, as with Germany's version of Merck (NYSE:MRK), and Cadila Healthcare in India. HUMIRA is one of the best-selling drug products and everyone wants a bite of the apple as the patent is set to expire.

The appeal for competitors to create an alternative to HUMIRA is because HUMIRA is a pipeline within a product, meaning it has multiple indications for which the drug is approved. One of those indications is for psoriasis. Johnson & Johnson (NYSE:JNJ) subsidiary, Janssen, recently released data for a phase 3 trial which showed its product to be superior than HUMIRA in individuals with moderate to severe plaque psoriasis. This product is anticipated to be a reason for J&J's growth because it anticipates the product to be a blockbuster.

Onto one of its other top-selling products under duress, IMBRUVICA, which was acquired in the Pharmacyclics deal. By top selling product, I mean its best-selling product if you exclude HUMIRA. IMBRUVICA pulled in $439M in total sales for the second quarter and has at least another decade before the patent expires but competitors are also trying to knock this product off the throne. Though BeiGene is still in phase 1 trials the company is claiming their product for the treatment of Waldenstrom's macroglobulinemia is more selective with less off-target inhibition. BeiGene is based in China but the studies are being performed in the US, Australia, and New Zealand and if this product ever gets to market here in The States there may be some initial pushback to administer it by physicians but the fears of taking medicine from China will subside eventually and eat into IMBRUVICA's sales numbers.

But despite competitors trying to create substitutes for AbbVie's HUMIRA, AbbVie itself is not resting on its laurels as it continues to develop products within its pipeline. The company recently received a breakthrough therapy indication from the FDA for its pan-genotypic regimen for the treatment of Hep C patients that have not responded to genotype 1 antivirals. With a breakthrough therapy indication the FDA will fast-track everything that it can so that the product is commercially available to patients as soon as possible.

I actually initiated my position in AbbVie in early June and have been pretty upset with the purchase thus far. So far, I'm down 0.9% on an annualized basis, but I will not be purchasing shares as long as they are above $56, because I believe that is where it offers additional value. I've selected $56 because it is the average of the 52-week range.

I swapped out of Seagate (NASDAQ:STX) for AbbVie during the 2016 second quarter portfolio change-out because I ended up turning a profit in the name (6.2%, or 21.3% annualized) and wanted to lock in those profits. Since the swap, I have lost out on massive gains, as AbbVie has underperformed Seagate since the swap. For now, here is a chart to compare how AbbVie and Seagate have done against each other and the S&P 500 since I swapped the names.

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When it is all said and done, it matters what the stock has done in an investor's portfolio at the end of the day. For me, AbbVie is my smallest position and has not been doing well, as I'm down 0.3% on the name including reinvested dividends, while the position occupies roughly 3.2% of my portfolio. I will not make purchases in the name as long as it is above $56. I own the stock for the value portion of my portfolio, and I will continue to hold onto the stock for now. My portfolio is up 6.1% since inception, while the S&P 500 is up 2.9%. Below is a quick glance at my portfolio and how each position is performing. Thanks for reading, and I look forward to your comments.

Company

Ticker

% Change incl. DIV

% of Portfolio

The Priceline Group Inc.

(NASDAQ:PCLN)

27.32%

6.19%

Southwest Airlines Co.

(NYSE:LUV)

13.81%

11.99%

Electronic Arts Inc.

(NASDAQ:EA)

12.18%

4.10%

KLA-Tencor Corporation

(NASDAQ:KLAC)

2.81%

5.35%

AbbVie Inc.

-0.33%

3.23%

Target Corp.

(NYSE:TGT)

-1.18%

8.14%

T. Row Price Group, Inc.

(NASDAQ:TROW)

-4.60%

11.26%

Diageo plc

(NYSE:DEO)

-6.55%

4.49%

Signet Jewelers Limited

(NYSE:SIG)

-9.97%

11.98%

Silver Wheaton Corp.

(NYSE:SLW)

-11.32%

3.96%

Gilead Sciences Inc.

(NASDAQ:GILD)

-13.35%

16.23%

SIG OCT 21 2016 85.00 CALL (Open)

-96.56%

0.04%

DEO OCT 21 2016 120.00 CALL (Open)

-97.21%

0.01%

Cash

$

13.01%

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Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade, and happy investing!

Disclosure: I am/we are long ABBV.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.