Although Wednesday was a bit of a quieter day for the markets, investors reacted to a pretty sizeable news announcement from top U.S. health regulators. The Food and Drug Administration (FDA) issued a statement asking several major drug companies to properly disclose newfound risks regarding a popular drug category called JAK Inhibitors. Shares of several major pharmaceuticals were down significantly following the news.
The FDA evaluated a number of different drugs, including those from Pfizer (NYSE: PFE), Eli Lilly (NYSE: LLY), and AbbVie (NYSE: ABBV). This type of drug category, known as JAK inhibitors, blocks certain inflammation-causing enzymes, known as Janus kinases. The idea is that these JAK inhibitors can help patients with chronic inflammatory diseases like rheumatoid arthritis.
However, a new safety study found that using JAK inhibitors could cause a number of unintended side effects, including blood clots, strokes, and heart attacks. The FDA said that all three companies would need to include these potential side effects as labels when they sell their products.
“Based on a completed U.S. Food and Drug Administration (FDA) review of a large randomized safety clinical trial, we have concluded there is an increased risk of serious heart-related events such as heart attack or stroke, cancer, blood clots, and death with the arthritis and ulcerative colitis medicines Xeljanz and Xeljanz XR (tofacitinib),” read an official statement from the FDA.
While the agency singled out Pfizer’s arthritis drug Xeljanz, it also mentioned Eli Lilly’s Olumiant and AbbVie’s Rinvoq as well, both of which operate on similar mechanisms. Only AbbVie’s stock was down on the news, as management placed a lot of hope on Rinvoq as a way to drive future earnings growth. The only JAK inhibitors that weren’t required to list these side effects were those that aren’t used for treating arthritis and other inflammatory conditions.
Shares of most pharmaceutical stocks affected by the news were down on Wednesday, although AbbVie was perhaps the worst performing of all of them. Shares were down around 9.6% over the course of the day, while Pfizer and Eli Lilly didn’t move much in comparison. For some reason, traders singled out AbbVie to sell.
Bernstein analyst Ronny Gal said that, following the FDA announcement, he revised Rinvoq’s peak sales estimate from $17.2 billion to just $11.2 billion. Even though it might not seem like a big deal from an outsider’s point of view, being forced to include these potential side-effects is a big deal for a company’s potential drug sales.
However, most analysts still remain optimistic about AbbVie’s future, despite the negative news. Piper Sandler analyst Christopher Raymond defended the company, saying that he thought this selloff was “unjustified.” Out of the 23 or so analysts covering the stock, 16 of them are bullish, while seven are neutral.
AbbVie Company Profile
AbbVie is a drug company with a strong exposure to immunology and oncology. The company’s top drug, Humira, represents close to half of the company’s current profits. The company was spun off from Abbott in early 2013. The recent acquisition of Allergan adds several new drugs in aesthetics and women’s health. – Warrior Trading News