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AbbVie‘s (ABBV) Humira franchise is safe through 2023 after a patent settlement with Amgen (AMGN), an analyst said Monday as he upgraded AbbVie and predicted that its profits would outgrow other large-cap pharmas through 2021.
Leerink analyst Geoffrey Porges upgraded AbbVie to an outperform rating and upped his price target to 106 from 89. He noted that the upgrade missed AbbVie’s recently strong performance, but “we believe that there is still further upside.”
“Our valuation for AbbVie is altered based on extending the U.S. market exclusivity for Humira in our model to 2023, from 2020-21 previously after the settlement with Amgen,” he wrote in a note to clients.
Under the settlement, Amgen will pay AbbVie royalties on sales of its Humira copycat. Humira is AbbVie’s most important drug, bringing in 69% of total sales in the second quarter. Humira is an anti-inflammatory med.
By the closing bell on the stock market today, AbbVie climbed 1.7% to finish at 90.39. Shares broke out of a flat base at a 75.14 buy point in late August, and have risen 18.3% since hitting that point.
The settlement allows Amgen to launch a biologic copy of Humira, known as Amgevita, in Europe next October. Its U.S. version, Amjevita, is set to launch in January 2023. Other rivals “are likely to be offered the same 2023 market entry deal,” Porges said.
Boehringer Ingelheim and Coherus Biosciences (CHRS) are closest to entry with biologic copies of Humira. Boehringer’s Cyltezo was approved in August, but the firm is in a patent battle with AbbVie. Coherus is still working to submit its application to U.S. regulators.
Dow components Merck (MRK) and Pfizer (PFE), in addition to Novartis (NVS) and MomentaPharmaceuticals (MNTA), are bound to file for approval of biologic copies of Humira in the coming quarters, but these will likely infringe on AbbVie’s Humira patents.
Any lawsuits would likely be resolved around mid-2022, removing the risk of a launch until right before the 2023 settlement date, Porges said. “As a result, we believe the certainty of U.S. Humira patent protection until 2023 is nearly 100%.”
Porges increased his 2018-19 Humira sales views by 1%-2%. Longer term, his Humira estimates increased 8% and 46% in 2020 and 2021, respectively. He expects AbbVie to hit 49%-50% operating margin from 2019-21.
He projects AbbVie 2017-21 earnings per share commanding an annual growth rate of 15%, topping large-cap pharma peers projected at 11% and mature biopharmas set for mid-single-digit growth.
“The growth horizon, along with the company’s increasingly visible late-stage pipeline, suggests that AbbVie stock should continue to re-rate into the range of these large-cap biopharma peers,” Porges said.