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MarketScreener Homepage  >  Equities  >  Nyse  >  AbbVie Inc.    ABBV

ABBVIE INC.

(ABBV)
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AbbVie forges deeper into cancer, as clock ticks for Humira

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04/28/2016 | 04:01pm EDT
A screen displays the share price for pharmaceutical maker AbbVie on the floor of the New York Stock Exchange

(Reuters) - AbbVie Inc placed another big bet on new cancer drugs on Thursday with a $5.8 billion acquisition that could lessen its dependence on arthritis treatment Humira, the world's top selling drug.

Shares of AbbVie rose 1.3 percent in afternoon trading.

The suburban Chicago drugmaker said it would buy privately held Stemcentrx and its experimental treatment for small cell lung cancer, which accounts for about 10 percent to 15 percent of all lung cancers and is notoriously difficult to treat.

It brings AbbVie into the broad and lucrative arena of solid tumors, such as lung cancer, breast cancer and colon cancer. AbbVie's current drugs, including leukemia treatment Imbruvica, focus on blood cancers, a smaller group of patients.

Companies with innovative cancer drugs, especially ones that spur the immune system to attack tumors, are attractive takeover targets. These life-extending new treatments can command extremely high prices that health insurers seem willing to pay for, unlike some other therapeutic categories where they are putting pressure on price.

"The mantra to reimbursement is innovation, and AbbVie is heading down the right path" by its widening focus on oncology, said John Boris, an analyst with Suntrust Robinson Humphrey.

AbbVie last year bought Pharmacyclics Inc and its half-ownership of Imbruvica for $21 billion. It sells the drug with Johnson & Johnson.

U.S. rival Bristol-Myers Squibb has been particularly successful with its oncology focus. It predicted on Thursday its earnings will jump as much as 29 percent this year, fueled by its new Opdivo treatment for melanoma and lung cancer. A similar new drug from Merck & Co also has a list price of $150,000.

Also on Thursday, French drugmaker Sanofi announced its $9.3 billion offer to buy Medivation, which makes prostate cancer treatment Xtandi.

Stemcentrx's drug, called Rova-T, is a toxic chemical that has been loaded onto an antibody. It targets a protein called DLL3 found in more than 80 percent of patients with the cancer. A biomarker is used to help select patients whose cancers express the protein. Late-stage trials involving patients who have already failed to benefit from chemotherapy and radiation are under way and AbbVie expects the drug to be approved by 2018.

"Oncology is an important growth driver and an area we plan to build a leading portfolio," Michael Severino, AbbVie's chief scientific officer, said in an interview.

But he said AbbVie will remain heavily involved in arthritis, psoriasis and other inflammatory diseases that are treated by Humira, which generates $14 billion in annual sales.

AbbVie's quarterly earnings results on Thursday demonstrated its reliance on Humira, for which sales jumped 15 percent to $3.58 billion, accounting for 60 percent of company revenue. As sales of Humira rise by double-digit percentages each year, investors are growing ever more fretful because its main U.S. patent lapses in December. AbbVie says other patents will stave off introduction of cheaper biosimilar forms of Humira until at least 2022. AbbVie said it would pay about $2 billion in cash for Stemcentrx and fund the remainder with stock. Stemcentrx shareholders may also receive up to $4 billion in cash if certain performance milestones are achieved.

AbbVie, which expects the deal to close in the second quarter, lowered its full-year adjusted profit forecast to $4.62-$4.82 per share, from its earlier view of $4.90-$5.10.

It said the deal would be dilutive this year and for several years to come.

(Additional reporting by Rosmi Shaji in Bengaluru, and Caroline Humer and Bill Berkrot in New York; Editing by Savio D'Souza, Matthew Lewis and Bernard Orr)

By Ransdell Pierson

Stocks treated in this article : Johnson & Johnson, AbbVie Inc

Stocks mentioned in the article
ChangeLast1st jan.
ABBVIE INC. 0.22% 80.67 Delayed Quote.-8.89%
DEERE & COMPANY 2.08% 228.02 Delayed Quote.31.61%
JOHNSON & JOHNSON -0.85% 137.19 Delayed Quote.-5.95%
MERCK & CO., INC. -0.38% 75.89 Delayed Quote.-16.56%
RISE, INC. -3.70% 26 End-of-day quote.-13.33%
WORLD CO., LTD. 0.15% 1355 End-of-day quote.-49.65%
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Financials (USD)
Sales 2020 45 374 M - -
Net income 2020 9 660 M - -
Net Debt 2020 74 016 M - -
P/E ratio 2020 15,9x
Yield 2020 6,12%
Capitalization 142 B 142 B -
EV / Sales 2020 4,77x
EV / Sales 2021 3,86x
Nbr of Employees 47 000
Free-Float 98,5%
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Mean consensus BUY
Number of Analysts 20
Average target price 109,25 $
Last Close Price 80,67 $
Spread / Highest target 57,4%
Spread / Average Target 35,4%
Spread / Lowest Target 19,0%
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Managers
NameTitle
Richard A. Gonzalez Chairman & Chief Executive Officer
Michael E. Severino Vice Chairman & President
Azita Saleki-Gerhardt Executive Vice President-Operations
Robert A. Michael Chief Financial Officer & Executive Vice President
Thomas J. Hudson Chief Scientific Officer, Senior VP-R&D
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