AbbVie Grabs FDA Approval In HCV, Faces Several Risks

About: AbbVie Inc. (ABBV), Includes: GILD
by: Terry Chrisomalis

AbbVie obtains FDA approval for Mavyret to treat children and adolescents between the ages of 12 to 17 for all 6 genotypes of Hepatitis C.

It was shown that 100% of the patients that received Mavyret for about 8 or 16 weeks had no detectable virus in their blood 12 weeks after completing treatment.

Q1 2019 global sales for Hep C came in at $815 million which declined by 11.3%, but the good news is that the U.S. market did see an increase.

Gilead remains a major competitor for AbbVie in the Hepatitis C space, however, as the market shrinks and they continue to undercut one another in pricing sales for both will eventually erode into non-existence.

AbbVie (ABBV) announced that the FDA had approved its drug Mavyret to treat children and adolescents with Hepatitis C. This FDA approval should do well to help expand the market opportunity for the drug around the globe. The company first received approval for Mavyret back in 2017 for adults with Hepatitis C. This is good news because the drug produced billions in revenue in 2018. There are still many issues associated with the Hepatitis C space and that will bring about major risks as the label is expanded.

The use of Mavyret being expanded for children and adolescents with Hepatitis C for all genotypes is very good news. Especially, when it is the first drug to be approved in children between the ages of 12 to 17 for this population for all 6 genotypes of the disease. Hepatitis C is caused by the Hepatitis C Virus (HCV) and is a blood-borne virus. It affects the liver and causes inflammation. There are even some instances where it could cause liver cancer and lymphomas.

Mavyret is composed of a combination of glecaprevir and pibrentasvir, which are an NS5A inhibitor and NS3/4a protease inhibitor respectively. FDA approval for this expanded label was based on two studies. One study recruited 47 pediatric patients with four genotypes of HCV. One thing to point out is that these were patients who were between the age of 12 and 17. In addition, they either had to have no cirrhosis or mild cirrhosis in order to be recruited into the study.

It was shown that 100% of the patients that received Mavyret for about 8 or 16 weeks had no detectable virus in their blood 12 weeks after completion of treatment. The second study showed that pediatric patients with cirrhosis, who had a history of liver or kidney transplant or genotype five or six of HCV, were able to clear the virus from their system in a similar way to that observed in adult patients.

It's good news that AbbVie has been able to expand the label for Mavyret. That's because it was needed, especially when several risks remain for the HCV program. The first risk involves global sales declining. It was noted in its Q1 2019 earnings report that global HCV revenues came in at $815 million. On a global scale, HCV revenues dipped by 11.3% on a reporting basis. The only bright side is that U.S. HCV revenues increased by 17.3% to $403 million.

The truth is that while Mavyret has done pretty well navigating the HCV market, it's going to continue to get worse. That's because Mavyret and other Hep C drugs are a cure for the virus. As the years go by, less and less people will need to be treated for this disease thus, shrinking the market as the years go by. Why do I feel that this is likely? For starters, Johnson & Johnson (JNJ) was forced to cut its HCV program many years ago, after it figured several competitors had already found a cure for the disease. The second risk involves competition from other companies in the HCV space like Gilead Sciences (GILD).

Gilead Sciences is a competitor, however, just like AbbVie it is also feeling the pain of a declining market. Revenues for Gilead's HCV products came in at $790 million in Q1 2019. The fall was quite dramatic, because in the same time period in 2018, HCV revenues were $1 billion. Both of these companies are going to continue to face a shrinking market. Gilead has even decided to take a more drastic measure to compete in the space and take AbbVie head on. Gilead intends to launch authorized generics for Harvoni and Epclusa. The goal is to gain back sales with massive volume, while at the same time being able to compete on the price in which Mavyret and other drugs are sold at.

The latest FDA approval for AbbVie should help sales of Mavyret to increase. The risk remains that the HCV space continues to see a decline in sales as patients are being cured. I believe this space will eventually consolidate to a point where minimal revenue can be made. Many competitors will continue to fight it out with one another. I expect the ability of each company in this space to find ways to undercut one another in price.

For evidence, I can point to Gilead's move to sell generics for Harvoni and Epclusa. This, despite the fact that the patent for Harvoni doesn't expire until 2030 and the patent for Epclusa doesn't expire until 2032. This move of trying to undercut one another in pricing will likely continue until the market shrinks low enough to where it won't even matter anymore. The FDA expanded label is a short-term bump in revenues for AbbVie, which will be good for this year and maybe the next. The good news is that the company has a solid pipeline full of other products such as SKYRIZI and updadacitinib to take the mantle. Sales of Mavyret will at least stabilize over the next few years, but I don't expect massive growth to take place in the HCV space. Still, the FDA approval to expand the label is at least a big win in the short term.

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