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New companies emerge from Abbott Laboratories

Abbott Laboratories located 1400 block Sheridan Road  North Chicago.  | Thomas Delany Jr.~Sun-Times Media

Abbott Laboratories located in the 1400 block of Sheridan Road North Chicago. | Thomas Delany Jr.~Sun-Times Media

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Updated: January 31, 2013 6:44AM

Analysts see promise and problems for the new companies emerging from North Chicago-based Abbott Laboratories this week.

Abbott will complete its split into two separate companies Tuesday.

The new AbbVie, which will launch the next day, will sell Abbott’s proprietary drugs and is forecast to have 2013 sales of more than $18 billion.

The other company, which will retain the Abbott name, will sell generic medicines, diagnostic tests and nutritional products. It is forecast to have 2013 sales of roughly $23 billion.

AbbVie is armed with the best-in-class immunology drugs ­— Humira, a blockbuster medicine that is used to treat rheumatoid arthritis, psoriasis, Crohn’s disease and other illnesses. The drug accounts for more than 50 percent of AbbVie’s total sales and more than 70 percent of its profit, and therein lies the rub.

“The biggest challenge is the high reliance on Humira,” said Damien Conover, Morningstar director of pharmaceutical research. “There is new competition coming.”

New branded drugs are launching in all of Humira’s key therapeutic areas, he noted, including Pfizer’s new rheumatoid arthritis drug tofacitinib. That drug’s efficacy is potentially as good as Humira and is in an oral form as compared to the twice-monthly Humira injections, although tofacitinib’s side effect profile is not fully clear and represents some risks, he said.

Meanwhile, Humira will lose patent protection in the U.S. in late 2016 and in Europe in 2018, leaving it open to potential generic competition.

Worst case, Humira sales could plummet 50 percent in 2018, according to Conover. “Humira’s sales trajectory following the drug patent losses in [the] 2017-18 period represent the biggest unknown facing AbbVie,” he said.

AbbVie also will face the loss of patent protection on some of its cholesterol drugs, including Tricor, Trilipix and Niaspan, which will face generic competition starting next year.

“So the reliance on Humira will continue to grow over the next one to two years,” Conover said.

But on the positive side, he notes Humira is approved in therapeutic areas, which should provide further room for the drug’s sales to grow, and its complex structure could impede generic competition.

Conover expects Humira to have an 11 percent five-year compound annual growth rate due to its strong efficacy and safety record.

Best-case, assuming generic and branded competition fail to significantly take market share from Humira, he projects 2 percent Humira annual sales growth in 2018.

He adds Humira positions AbbVie to support the company’s next generation of pipeline drugs.

“They are developing their pipeline; it’s something that is improving,” he said. “I would anticipate next year we’d see some acquisitions of companies that could further augment their internal efforts of research and development, so that would enable them to bring new products to the market to help them diversify a little bit away from Humira.”

Key products in late-stage development in Abbott’s pipeline include drugs to treat Hepatitis C. The drugs are now referred to as ABT 450, ABT 333 and ABT 267.

“Those three collectively could all bring in close to $5 billion in annual sales if they are successful and other competitive products are less successful,” Conover said.

As for the new Abbott, Morningstar senior analyst Debbie Wang sees opportunities for it to raise its profitability. The company’s nutritionals business faces brighter growth prospects outside the U.S. and especially in emerging markets, where the growth of middle-class families has spurred demand for nutrition products, such as Similac and Ensure, Wang said in a research report.

“It’s an exciting time to be an Abbott shareholder,” said Mark Geraci Jr., a financial adviser for Sound Strategy Estate & Retirement Specialists in Round Lake Beach who works closely with many local Abbott employees, retirees and shareholders. “While near-term volatility is expected, a recent poll of clients revealed that none were planning to sell any of their shares.”

Contributing: Frank Abderholden

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