AbbVie Inc (NYSE:ABBV), a Pharma giant has a cautionary tale before it, but it’s unclear if it’s paying attention.
Since October last year, Celgene Corporation (NASDAQ:CELG) has has shed off $48 billion in market cap following several drug setbacks plus a huge guidance cut. From March 13, Abbvie has shed off $40 billion and has been a victim of a cancer-drug flop and choppy markets. The two companies seem to be suffering from similar fundamental problems. They are overly depending on one drug. There are also growing concerns among investors concerning the two company’s ability grow through the eventual demise of those drugs.
So far, AbbVie has been performing much better than Celgene. However AbbVie has a volatile tendency every time it approaches aggressive forecasts which put it at even a bigger risk of a possible spiral downfall in share price as well as management credibility.
Both Celgene and AbbVie have heavily invested in M&A and R&D and as they struggle to convince investors that there’s life after primary drugs. Many analysts have predicted that Celgene’s blood-cancer drug Revlimid and AbbVie’s inflammation drug Humira will experience there first annual drop sales in 2023.
The two companies have aggressive investment coming on the way and also have aggressive forecasts. AbbVie is especially having grandiose predictions. In October, the company announced that was expecting over $35 billion in risk-adjusted sales from non-Humira drug in 2025 and up to $47 billion if things go well for the company.
Last year, the company generated $28.22 billion in sales and out of that, $18.4 billion came from Humira. One of the major components of the 2025 prediction is Rova-T, a cancer drug which with the $5.8 billion acquisition of Stemcentrx at a cost of $5.8 billion in 2016. AbbVie has predicted that the higfhest sales from the drug may reach $5 billion.
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However, last week the company announced that the drug failed badly in its second phase of its lung-cancer trial. The company only announced a portion of that saying that additional data would be made available in due course. Chances are high that the company may be forced to call off the acquisition.