$3bn just not good enough to satisfy AbbVie investors

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High expectations are a hard tyrant, AbbVie was reminded last week. Shares slumped 4% on Friday after executives forecast that sales of its hepatitis C combination Viekira Pak would reach a $3bn run rate by the end of 2015.

This was disappointing to investors who were expecting it to be up to 30% higher, prompting the erasure of $4bn-worth of market capitalisation. More optimistically, AbbVie reported that payer contracts had secured access for 40% of covered lives in the US so far, but the picture emerging from its launch is that Viekira still has much to prove.

Groping in the dark

Viekira Pak comprises the pills Viekirax and Exviera, and got the US green light on December 19, so there were very little sales to report for the fourth quarter (Viekira approval heralds start of hep C price war, December 22, 2014). It is being launched into a market in hep C genotype 1 that is increasingly dominated by Gilead Sciences’ single-pill combination Harvoni.

Prescription data from the analysis firm IMS, as reported by sellside analysts, have been less than enlightening as Viekira Pak’s biggest buyer, the pharmacy-benefit manager (PBM) Express Scripts, has not disclosed anything from its biggest channel, mail-order delivery. Thus investors have little hard information on which to draw on when assessing the launch trajectory.

AbbVie’s fourth-quarter earnings call therefore allowed some of the first pieces of the puzzle to emerge: 1,100 prescriptions were written through January 16, and guidance is for a $3bn sales run rate by the end of 2015.

A $4bn run rate had been expected by analysts like UBS and, apparently, more than a few investors; the EvaluatePharma consensus of sellside analysts forecasts $3.1bn in 2016 sales, making this a controversial call.

Indeed, four days before AbbVie disclosed its guidance, BMO analyst Alex Arafei was prescient in writing, “We continue to believe that the company’s 2015 hep C guidance will likely disappoint investors.” BMO had warned of this outcome when it downgraded shares to market perform in November, but last week the firm cut its price target even further, from $65 to $63.

Not over until its over

Still, is too soon to be tallying the score in the hep C game. After winning the Express Scripts contract immediately, AbbVie has gone on to miss out on numerous subsequent major contracts, such as the biggest US health insurer in United Healthcare, the number three in Anthem and the number five in Humana, as well as CVS, another PBM (Hep C price war evolves into value competition, January 20, 2015).

Another PBM, Prime Therapeutics, put them both on its formulary, while the Medicaid programme in Missouri, where Express Scripts is headquartered, has selected Viekira exclusively. AbbVie has promised to match the rebate it offered Missouri to a 25-state purchasing consortium that includes big-population states in New York, Florida and Texas.

But the news ought not be seen as all bad, if the company’s pronouncements are to be believed. Based on contracts signed so far, AbbVie's chief executive, Rick Gonzalez, said 20% of covered lives in the US would have exclusive access to Viekira Pak and another 20% to both drugs – some of the contracts were with smaller, regional PBMs and Blue Cross/Blue Shield plans that were completed with apparently little fanfare.

This leaves millions of patients spread across numerous health insurers – public and private – left to fight for; budget-constrained public health plans like Medicaid, the Veterans Administration and state prisons might be more attuned to the price-based message pitched by AbbVie.

While Friday’s sell-off was a big one-day drop for a company with a $100bn market cap, it dropped the company only to levels last seen in late October. April should be a much more volatile month as AbbVie readies data from its first full quarter of sales.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @JonEPVantage on Twitter

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