Abbvie Inc (NYSE:ABBV) shares recovered in the early afternoon Thursday after dipping 3% in after hours trade the evening prior on the news that CVS Health Corp (NYSE:CVS) announced it will remove Humira, a leading rheumatoid arthritis medication, from some preferred drug lists for reimbursement starting April 1, endorsing biosimilar alternatives.
Sandoz's Hyrimoz and an unbranded version of Humira, along with Biocon's near-copy drugs, will be preferred on CVS formularies.
A co-branded, identical version of Humira, produced by CVS-owned Cordavis, is set for release in the second quarter of the year, reports from the US stated.
This move, highlighted by CVS's Caremark division president David Joyner, aims to lower drug costs by prioritizing biosimilars.
Despite biosimilars not being exact duplicates due to the complexity of biotech drugs, they provide a cost-effective option.
Even with the emergence of biosimilars, AbbVie's Humira, which reached peak sales of US$21.2 billion in 2022, remains widely available.
CVS's decision reflects the evolving landscape in the US prescription drug market, significantly influenced by major pharmacy benefit managers.
Analysts at UBS saw the 3% drop in AbbVie’s share price after Wednesday’s close as “overdone,” noting management’s commentary that “the majority of patients within the CVS entity, which includes both template and custom clients, will have parity access to Humira” in 2024.
They also highlighted that during their pre-quarter discussions with the company, AbbVie said it had strong visibility on Humira pricing and volume dynamics given that its contracts for the new year had already been finalized.
They do not see the news impacting the expected $11 earnings per share (EPS) floor.
“Recall, the $11 EPS floor was maintained despite a $0.32 dilution anticipated in 2024 from the recent Immunogen and Cerevel deals,” the UBS analysts wrote.
“As a sensitivity, assuming the majority of the cushion comes from Humira strength, this suggests a 2024 US erosion of 34% or better versus consensus of 43%.”
They have a ‘Neutral’ rating on the stock and a US$150 price target.
AbbVie shares traded up 0.9% at US$161.91 in the early afternoon on Thursday.
- Updated with share price movement, analyst comments -