AbbVie Seems Content With A Small Share Of The Parkinson's Market

| About: AbbVie Inc. (ABBV)

Summary

AbbVie made $78M off of Duodopa, or roughly 1.1% of overall revenues.

The Parkinson’s market is estimated to hit $3.2B by 2021 AbbVie can ill-afford to sit on their laurels.

NeuroDerm (NDRM) received excellent results for its Parkinson’s Phase 2 trial for ND0612H and is hot on AbbVie's trail.

Shares of AbbVie (NYSE:ABBV) have struggled to keep pace with the rest of the market since the day after President Trump was elected as president. Shares have only moved higher to the tune of 6.8% while the rest of the market as measured by the S&P 500 has moved higher to the tune of 12%. The company's flagship product Humira is under constant attack from competitor and substitution products which contributes to the sluggishness of the share price movement. Now the company's Parkinson's disease product is under attack and I'd like to take the time to evaluate the consequences.

Recently NeuroDerm (NASDAQ:NDRM) received excellent results for its Parkinson's Phase 2 trial for ND0612H. When compared to AbbVie's Duodopa the results showed that it had comparable efficacy but with improved use and safety profiles. On the results Cowen increased its price target on NeuroDerm to $70. Just to give you an idea, in the most recent quarter AbbVie made $78M off of Duodopa, or roughly 1.1% of overall revenues.

Parkinson's is a central nervous system disorder which causes tremors in the individual affected. Currently more than 200k people in the US are diagnosed with Parkinson's each year and the disease can't be cured. The majority of people affected by the disease are typically in their 40's or older. Duodopa along with other products are used to help treat the symptoms of Parkinson's.

The damage in the brain causes a chemical imbalance which Duodopa tries to correct. The product comes as gel but is administered via a portable pump. This is a very laborious task which requires a medical professional to tune the pump to the proper dosage required and involves lots of training on how to use the pump. As you can see it probably won't take much by way of innovation to take revenue away from AbbVie in this arena.

But with the Parkinson's market estimated to hit $3.2B by 2021 AbbVie can ill-afford to sit on their laurels and let NeuroDerm take share away. Granted NeuroDerm still has to execute on their Phase 3 trial, they still have a long way to go before they can get their product on the market. AbbVie currently is not working on anything else in the pipeline with respect to Parkinson's which means management is currently content with what they have on the market right now.

There are definitely high barriers to entry in central nervous diseases ranging from a tough regulatory environment, to high innovation/development costs. One thing is for certain though, if NeuroDerm, or any other competitor for that matter comes into the market with a viable commercial product it will hardly effect AbbVie.

As I mentioned before, Duodopa only contributes 1% of the top line and because management doesn't have anything else in the pipeline for Parkinson's it may just let someone else take on the burden of developing a product then potentially picking up that company in an acquisition.

I actually initiated my position in AbbVie in early June of 2016 and have been pretty happy with the purchase thus far. I will only be purchasing additional shares if they are below $61, because I believe that is where AbbVie offers additional value. I've selected $61 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 gains. 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. I keep kicking myself every time I see that chart.

Source: Google Finance

When it is all said and done, it matters what the stock has done in an investor's portfolio. For me, AbbVie is one of my smallest positions and has been doing well, as I'm up 7.7% on the name including reinvested dividends, while the position occupies roughly 3.9% of my portfolio. I will make purchases in the stock only if it is below $61.

I own AbbVie for the value portion of my portfolio, and I will continue to hold on to the stock for now. My portfolio is up 16.9% since inception, while the S&P 500 is up 15.2%. 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

Facebook, Inc.

(NASDAQ:FB)

13.06%

9.62%

AbbVie Inc.

7.67%

3.94%

PulteGroup, Inc.

(NYSE:PHM)

1.89%

3.73%

3M Company

(NYSE:MMM)

1.44%

3.71%

SEI Investments Company

(NASDAQ:SEIC)

1.09%

7.40%

O'Reilly Automotive, Inc.

(NASDAQ:ORLY)

0.07%

3.66%

Wyndham Worldwide Corporation

(NYSE:WYN)

-0.17%

3.65%

Valero Energy Corporation

(NYSE:VLO)

-0.65%

3.63%

General Electric Company

(NYSE:GE)

-1.86%

6.18%

V.F. Corporation

(NYSE:VFC)

-2.94%

9.63%

Silver Wheaton Corp.

(SLW)

-12.09%

7.62%

Gilead Sciences Inc.

(NASDAQ:GILD)

-13.60%

19.71%

Cash

$

17.53%

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.

About this article:

Expand
Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.
Tagged: , , , Drug Manufacturers - Major
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here