In late July, AbbVie (NYSE: ABBV) applied for a new indication with the European Medicines Agency (EMA) for Rinvoq to treat adult patients with moderate-to-severe Crohn's disease.
Thanks to encouraging phase 3 clinical trial results, the indication will likely be approved within the next several months. But how much could an approval for Rinvoq to treat Crohn's disease patients in the European Union mean in terms of additional annual sales for the pharma stock? Let's dive into the results from the clinical trial and the EU Crohn's disease market to get an answer.
A treatment with clear efficacy
Crohn's disease is a type of inflammatory bowel disease that results in long-standing inflammation and harm to the digestive system. The disease can affect any part of the gastrointestinal tract, from the mouth to the anus. This is in stark contrast to ulcerative colitis, which is confined to the colon and/or rectum.
Abdominal pain, persistent diarrhea, weight loss, and fatigue are several of the most common symptoms of Crohn's disease, according to the Crohn's & Colitis Foundation of America. If left untreated or not properly treated, Crohn's disease can cause vitamin and mineral deficiencies, osteoporosis, and kidney stones.
The good news is that as more treatments are introduced over time, Crohn's disease patients and their healthcare providers will have more options to lean on to manage the disease. This should help many patients live a higher quality of life. And one of those medicines that could soon be launched is Rinvoq.
Using the Crohn's Disease Activity Index as a guide, patients receiving 15 milligrams or 30 milligrams daily of Rinvoq achieved better outcomes in managing their condition than those receiving a placebo. The 15 mg and 30 mg Rinvoq groups achieved clinical remission (i.e., a significant or complete reduction in symptoms) rates of 37% and 48%, respectively, at week 52. For context, this was far higher than the 15% clinical remission rate of the placebo group.
There is a correlation of increased risk of adverse events -- such as cancer, blood clots, and heart attacks -- with the Janus kinase (JAK) inhibitor drug class in which Rinvoq belongs. But these risks still haven't shown up in its clinical trials to date. The serious adverse event rate of patients taking Rinvoq was 25 per 100 patient-years for the 15 mg daily dose and 21 for the 30 mg daily dose. This was meaningfully lower than the 37.4 rate per 100 patient-years for placebo. This translates into 12 less patients per 100 patients experiencing serious adverse events over the course of the 52-week clinical trial.
The indication would be an incremental sales increase
Rinvoq is a compelling medicine for patients with moderate-to-severe Crohn's disease. What could this translate into for sales?
There are approximately 1.5 million patients with Crohn's disease in the European Union. And of this patient pool, 21% to 22% experience moderate-to-severe Crohn's disease in a given year. This equates to a potential market of roughly 322,000 patients.
Given that Rinvoq will likely be weighed down by the safety concerns of its drug class, I believe it will remain a second-line treatment. However, since other drugs like Johnson & Johnson's (NYSE: JNJ) Stelara are more established and have fewer safety concerns, I'd assume that Rinvoq will seize 6% of this patient share -- or about 19,000 patients. That's because Rinvoq can be beneficial to patients that don't improve on drugs like Stelara.
The annual list price of Rinvoq in the United States is $68,000. Factoring in that drugs are about half the cost in the European Union, I will use an annual list price of $30,000. Further considering patient financial assistance programs and negotiations with health insurers, I'll use an annual net price per patient of $21,000.
This would be a $400 million lift to AbbVie's annual sales, which may not seem like much stacked against the $59 billion in revenue that analysts are expecting for this year. However, adding in the potential Crohn's disease indication in the U.S. and other markets, Rinvoq could generate well over $1 billion in annual revenue for AbbVie from Crohn's disease alone.
A safe, market-crushing dividend at a fair valuation
AbbVie offers income-focused investors a 4% dividend yield, which is more than double the S&P 500 index's 1.6% yield. With the dividend payout ratio projected to come in below 41% in 2022, investors can be confident that the stock's dividend is safe.
And AbbVie's trailing-12-month (TTM) price-to-free-cash-flow (P/FCF) ratio of 11.4 is moderately below its median TTM P/FCF ratio of 12.9. This is an appealing valuation for a company with strong fundamentals and a deep drug pipeline.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.