AbbVie Amgen Humira Settlement: The Drug Is Still Undervalued

(Bloomberg Gadfly) -- There are very few things biotech and pharma investors are inclined to under-value. But the stunning longevity of the world's best-selling drug -- AbbVie Inc.'s Humira -- might be one of them. 

Amgen Inc. on Thursday agreed to delay the launch of an Humira copycat until late 2018 in Europe and 2023 in the U.S. I've been skeptical of AbbVie's claims that it could keep Humira competition-free in the U.S. and grow the drug's sales through 2020. But now it seems it just might manage it. 

If Humira were any other drug, it would already be facing competition. The medicine was launched in the U.S. in 2003, and its lead patent expired in December 2016.

But it's a "biologic" medicine, made in living cells, and replicating it is complicated. And AbbVie's overwhelming desire to shield the drug -- understandable given that it accounts for more than 60 percent of the company's total sales -- has led it to assemble a formidable array of protective patents.  

Other firms are still developing Humira copies. But Amgen's capitulation suggests others may settle, as well. The company has always seemed the likeliest candidate to successfully replicate Humira. It's one of the largest and richest developers of "biosimilars," copies of biologic drugs. It's especially experienced on the legal and regulatory front, as it's both researching biosimilars and fighting attempts to copy its own drugs. Other firms are unlikely to fare much better. 

There are other threats to Humira's growth. For one, the drug's market may finally be maturing. Similar drugs face earlier biosimilar competition. Around a third of Humira's sales occur outside of the U.S., where copies have already launched in India, and more will come next year. But even maintaining modest growth, delaying the drug's peak, could mean billions of extra revenue for AbbVie. 

The company can spend those extra billions on new medicines, making the eventual decline of its lead medicine easier to bear. It also has more time to develop the drugs already in its pipeline.

AbbVie has tended to overpay for acquisitions in the past. But Humira's stunning persistence relieves some of the pressure to make deals, letting it buy assets from time to time with money to spare. 

Such stability and spending power is hard to come by, and hard to value -- investors may not be fully accounting for it yet.

Update: Clarifies current availability of Humira biosimilars.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

To contact the author of this story: Max Nisen in New York at mnisen@bloomberg.net.

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.