AbbVie agreed to significantly discount the price of its Viekira Pak hepatitis C therapy in exchange for exclusive access to Express Script's 25 million customers, under terms of the deal announced Sunday night. Starting Jan. 1, Gilead Sciences' (GILD) competing hepatitis C drugs, Sovaldi and Harvoni, will be excluded from Express Scripts' formulary. The deal covers patients with genotype 1 hepatitis C, the most common form of the liver disease in the U.S.
AbbVie shares were down 0.87% to $67.12 on Monday. Express Scripts shares were up 1.2% to $81.97.
Jeffrey Holford, Jefferies (Buy on AbbVie)
We are increasingly optimistic over AbbVie's potential sales for Viekira Pak in Hep C following a strong label and exclusive contract award with Express Scripts over the weekend. We believe AbbVie will issue very strong 2015 EPS guidance in early January and reiterate the shares as one of our Top Picks for 2015.
We see the exclusive contract win with Express Scripts as a huge win for AbbVie. Express Scripts have indicated that the price and effectiveness of the AbbVie regimen were important factors in this decision, making Viekira Pak the exclusive option for patients with genotype 1 hepatitis C, regardless of symptoms or disease progression, starting January 1, 2015. Express Scripts also noted that: "Unlike pricier hepatitis C medications that many U.S. payers were covering only for patients experiencing stage 3 or 4 liver disease, Viekira Pak will be available for all clinically appropriate plan members covered by the Express Scripts National Preferred Formulary."
We believe that AbbVie has the strongest earnings momentum potential for 2015 across our entire European and US Large Cap Pharmaceuticals group. We see the decision to issue 2015 EPS guidance in early January by the company as a very bullish indicator for positive earnings momentum. Currently we estimate 2015E EPS of $4.48 versus consensus of $4.27. Our 2015E EPS estimate currently includes profits from $2.125bn of Viekira Pak sales (risk-adjusted from $2.5bn prior to approval).
Colin Bristow, Bank of America Merrill Lynch (Buy on AbbVie)
This is a significant positive for ABBV, clearly indicating PBM/payers' high sensitivity to price in the costly HCV market and ABBV's willingness to drive uptake through discounting/rebating. Additional details of note were; 1) key competitor GILD's Sovaldi and Harvoni (also JNJ's Olysio) will be excluded from the formulary as of Jan-1 for most patients, 2) the deal will provide a "significant discount" on Viekira Pak (our current estimates assume ~15% rebate), 3) the deal is over multiple years, and 4) there will be no limitations regarding fibrosis/cirrhosis for coverage approval.
Viekira Pak is priced at $83,319 for 12 weeks of therapy (WAC price, excludes ribavirin, though cost is negligible), a 12% discount to GILD's Harvoni. However, the net price ABBV will realize will be significantly lower than this given ABBV will offer discounts/rebates to payers/PBM's to drive uptake. Our current $2.5bn 2015 revenue estimate for Viekira Pak assumes ~20% gross-to-net discount and 20% market share. Clearly ABBV may sacrifice net price in order to drive uptake as is likely the case with the Express Scripts deal.
Vamil Divan, Credit Suisse (Outperform on AbbVie)
As prior data releases reflect, ABBV's regimen is competitive vs. GILD's on cure rates, however, differences in duration rates/regimen is a key area of investor interest. There were no major surprises on ABBV's label, however, some nuances worth noting include: (1) Label requires use of ribavirin with ABBV's triple drug regimen (3-DAA) in GT1a treatment-naïve, non-cirrhotic patients despite ~90% cure rates with ribavirin free regimen (3DAA + RBV results in 95%+ cure rate); (2) In GT1a treatment-naïve cirrhotic patients, the label requires 24-weeks with ABBV's regimen vs. 12-weeks with GILD's regimen; (3) In GT1b treatment-experienced cirrhotics, the label requires 12-weeks use of ABBV's regimen vs. 24-weeks of GILD's. We assume most specialists will follow the FDA's dosing guidelines but will monitor prescribing habits closely as we move into 2015.
Given label and pricing disclosures, we see 2015 ABBV HCV estimate achievable, with room for upside; reiterate Outperform. As attention now turns to commercialization, we think ABBV's regimen can take 20-30% share of the HCV market. We believe our 2015 estimate ($2.1Bn) is now generally in-line with Consensus and we see this level as being achievable, with room for possible upside. Prescription trends will be closely watched in 1Q to assess impact on near-term numbers, while disclosure on cure rates from ABBV's 2nd generation (likely 1H '15) will help determine ABBV's long-term competitiveness. We reiterate Outperform on ABBV given Humira's strength and upside from HCV and the pipeline.
Alex Arfaei, BMO Capital Markets (Market Perform on AbbVie)
The American Association for the Study of Liver Diseases (AASLD) recommendations seem to neutralize Viekira's key advantage vs. Harvoni in the commercially important GT1 treatment experienced cirrhotic patients. We now do not see any patient subgroup where Viekira has a clinical advantage over Harvoni. To counter this, AbbVie seems to be taking an aggressive rebate strategy, as indicated by the Express Scripts announcement. However, the Express Scripts decision will likely be controversial given the AASLD recommendations.